Germany revises up Q3 economic growth

Germany’s economy grew by a better-than-expected 8.5 percent in the third quarter, revised data showed Tuesday, powered by household spending as the country emerged from tough coronavirus lockdowns earlier this year.

The record increase in gross domestic product (GDP) beat the preliminary estimate of 8.2 percent  quarter-on-quarter announced in October, federal statistics agency Destatis said.

Private consumption jumped, Destatis said, partly thanks to a temporary reduction in VAT to the end of the year, alongside a 300 euro ($356) bonus per child for families as part of the government’s stimulus package. 

A sharp rise in exports and investment in machinery and other equipment also fuelled the recovery over the summer months.

The growth could “offset a large part of the massive decline in GDP recorded in the second quarter” due to the pandemic, Destatis said. 

Between April and June, when Europe’s top economy was hit by shutdowns of businesses and factories, GDP plunged by a record 9.8 percent. 

But the lifting of restrictions allowed for a strong rebound as consumers returned to shops and manufacturing restarted.

“Once again, it’s a positive surprise” said Jens-Oliver Niklasch, analyst for LBBW bank, adding that it was “clearly consumption-driven recovery”.

However, “the risk of another setback in the final quarter of 2020 due to the ongoing lockdown is quite high”, he said. 

Germany is currently in the midst of new measures o curb the spread of a second wave of the virus, with the government predicting just 0.4 percent growth in the final quarter. 

Overall, the government expects the German economy to shrink 5.5 percent in 2020 before rebounding by 4.4 percent in 2021.

Chancellor Angela Merkel will meet on Wednesday with regional leaders to decide on expanding restrictions, with any extension making “a double-dip, a contraction of the economy, in the final quarter of the year inevitable”, ING bank analyst Carsten Brzeski said.