The German economy grew more than expected in the second quarter as the easing of Covid-19 curbs spurred consumers to dip into record savings piled up during the winter lockdown and the state pressed on with a huge debt-financed stimulus push.
Gross domestic product grew an adjusted 1.6 per cent on the quarter, the Federal Statistic Office said on Tuesday, up from its previous estimate of 1.5 per cent and following a revised first quarter contraction of 2 per cent.
On the year, Europe’s largest economy expanded by a calendar-adjusted 9.4 per cent in the second quarter, leaving economic activity 3.3 per cent below the pre-crisis levels of the fourth quarter of 2019.
Private consumption grew by 3.2 per cent between April and June, contributing 1.6 per cent percentage points to overall growth and pushing the savings rate down to 16.3 per cent. In the first quarter, when shops, bars and restaurants were closed under Germany’s lockdown, that rate hit a record high of 22 per cent.
Public consumption expanded 1.8 per cent, contributing 0.4 per cent to the overall growth rate.
Spending
State spending to cushion the impact of the coronavirus crisis, financed with unprecedented new borrowing, blew a €80.9 billion hole in the public finances in the first half of the year, the statistics office said.
This equated to a public sector deficit of 4.7 per cent of GDP, the largest in 26 years and what Carsten Brzeski from ING Bank termed “the downside of the rapid economic recovery.”
The stimlus should help lift the economy back to pre-crisis levels before the end of 2021 but will leave the government that emerges from next month’s federal election with a heavy burden to shoulder, Brzeski said.
Germany’s quarter-on-quarter GDP growth compared with a second quarter euro zone average of 2 per cent and growth of 0.9 per cent, 2.7 per cent and 2.8 per cent respectively the bloc’s next biggest economies, France, Italy and Spain. – Reuters
