German economy shrank by record 9.7% in second quarter

BERLIN (REUTERS) – The German economy contracted by a record 9.7 in the second quarter from the previous three months as consumer spending, company investments and exports all collapsed at the height of the Covid-19 pandemic, the statistics office said on Tuesday (Aug 25).

The economic slump was much stronger than during the financial crisis more than a decade ago, and it represented the sharpest decline since Germany began to record quarterly GDP calculations in 1970, the office said.

Still, the reading marked a minor upward revision from an earlier GDP estimate for the April-June period of -10.1 per cent quarter-on-quarter that the office had published last month.

Consumer spending shrank by 10.9 per cent on the quarter, capital investments by 19.6 per cent and exports by 20.3 per cent, the seasonally adjusted GDP data showed.

Construction activity, normally a consistent growth driver for the German economy, fell by 4.2 per cent on the quarter.

The only light came from state consumption which rose by 1.5 per cent on the quarter due to the government’s coronavirus rescue programmes, the office said.

The German parliament has suspended the debt brake this year to allow the government to finance its crisis response and fiscal stimulus push with record new debt of 217.8 billion (S$352.1 billion) euros.

The fiscal U-turn after years of balanced budgets means that the German state recorded a budget deficit of 51.6 billion euros from January to June, the statistics office said in a separate statement.

That represents a deficit of 3.2 per cent of economic output as measured by the EU’s Maastricht criteria.

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