DWS: German GDP - The first part of the drama in detail

DWS: German GDP - The first part of the drama in detail


The data published today by the Federal Statistical Office confirm the 2.2% decline in economic output in the first quarter already calculated in the flash estimate (all figures compared to the previous quarter). Together with the negative final quarter of 2019, Germany is now officially in recession. But the first quarter is only the overture. After all, only two weeks of the entire quarter were in lockdown mode. The real drama will only become apparent in the figures for the second quarter. Here, we expect a decline of 10 percent.

The stock piling purchases in late March were not enough to boost private consumption into positive territory: private consumer spending declined by 3.2%. This is mainly due to "angst saving". The savings rate jumped from 9.7 %to 16.7%. The consumer has switched to crisis mode. This is also reflected in the build-up of inventories.

Even government consumption (+0.2%) was unable to save the consumer sector.

Unsurprisingly, investments in machinery and equipment declined sharply (-6.9%). The only ray of hope here was the construction sector, which performed surprisingly well with a plus of 4.1%. Based on anecdotal evidence, it can be assumed that it even survived the real crisis month of April relatively well.

The fact that the rest of the world was also in crisis mode can be clearly seen from exports. They fell by 3.1%. Foreign trade deducted a total of 0.8 percentage points  from growth.

However, there was one ray of hope: gross wages and salaries rose strongly by 2.5% compared with the same quarter of the previous year. The significant increase in short-time working allowances gives reason to hope that the income losses in large sections of the population will not be as drastic as in some other EU countries or the USA. The unsurprising flipside of this coin is that corporate and property income fell sharply by 5.1% compared with the previous year.