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Germany's slide into recession during Q1


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A slump in capital investments, private consumption and exports pushed the German economy into a recession in the first quarter, detailed data showed yesterday, giving a glimpse of the damage caused by the coronavirus pandemic.

Germany's Federal Statistics Office said capital investments fell by 6.9pc, private consumption by 3.2pc and exports by 3.1pc between January and March compared with the last three months of 2019.

This meant that private consumption took off 1.7 percentage points of overall economic activity and net trade shaved off 0.8 percentage points. That translated into a first-quarter contraction of 2.2pc, the steepest rate since 2009.

However, investments in the construction sector - which accounts for almost 10pc of overall national output and is Germany's largest employer - rose by 4.1pc, contributing 0.4 percentage points to quarterly growth.

Government expenditure too rose by 0.2pc on the quarter, the data showed, preventing a deeper contraction.

The 2.2pc drop in quarter-on-quarter output was the widest since the financial crisis of a decade ago and the second biggest since German reunification in 1990. It followed a 0.1pc contraction in the last three month of 2019.

Economists expect a bigger fall in output in the second quarter as the bulk of curbs introduced in mid-March to fight the outbreak become more apparent.

"As the first quarter performance is the result of 'only' two weeks of lockdown and supply chain disruptions due to lockdown measures in Asia, it does not need much analytical skill to predict a much stronger slump in the second quarter," said Carsten Brzeski, economist at ING.


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