ECONOMIC RECOVERY INTERRUPTED DUE TO NEW LOCKDOWN
After ten years of continuous economic growth, the coronavirus pandemic caused GDP to decline by 5.0% overall in 2020. However, the decrease turned out to be not nearly as dramatic as many experts had been predicting over the course of the year. This is due to the resilience of the German economy, but also to the comprehensive packages of measures adopted by the Federal Government to support the economy and stabilise incomes. After the second quarter had recorded a historic slump of 9.8%, a remarkable process of recovery set in as restrictions were gradually lifted. In the third quarter, German economic output grew by 8.5%, reaching approximately 96% of the level posted in Q4 2019 before the outbreak of the pandemic. Although the recovery went on to lose momentum, economic output figures continued to predominantly record increases through November. The new lockdown, however, is likely to have caused GDP to stagnate in the fourth quarter.
The latest figures are indicative of a two-pronged economic development: while the services sector is once again being more heavily impacted by the restrictions on social contacts, the industrial sector continues to experience robust development. Despite the partial lockdown, new manufacturing orders and industrial output continued to grow in November, as did trade in goods. Notwithstanding the uncertainty over the conclusion of a Brexit agreement between the EU and the United Kingdom – still pending at the time of the surveys –, business and export expectations in the manufacturing sector brightened further in December. Also, the labour market has so far demonstrated considerable resilience. Employment has increased overall in recent months, with unemployment continuing to decline. The latest figures, however, point to yet another rise in short-time work.