Germany in recession due to the decline in consumption

  •   27/05/2020 - 11h29
  •   DEHOUI Lionel

The new week began with sad news in the country of Angela Merkel. After the news coming from the German judiciary and opposing the country's central bank to the European one, the place is now left to other subjects. The Germans would have preferred that the new subject in the spotlight be in their favour, but this is not the case. This Monday, Berlin appears to be plunging into recession according to some figures. The first quarter would have been one of all disappointments in Europe's largest economy, Germany. During this period, Berlin was plunged into recession due to the decline in consumption, but also the decline in capital investment. Added to these reasons is the decline in the country's exports. This is indeed what is revealed by the figures published on Monday, which provide information on Germany's gross domestic product (GDP).

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Germany in recession due to the decline in consumption

An entry into a historic recession

The economic situation in Angela Merkel's country is quite complicated. This country has recorded very sharply declining figures in the first three months of the current year 2020. A situation that has not been seen in Berlin since the economic crisis that shook the world in 2009. During these months, the German economy quickly found itself in recession. This can be explained by the closure of shops, but also by the closure of companies in order to finish with the Covid-19.

The situation in Germany can be described by the 2.2% drop in its GDP in the first quarter of 2020. A fall evaluated by referring to the GDP of the previous quarter. This GDP confirms the detailed figures released by the Federal Statistical Office on Monday. Destatis is the name of the office which is reputed enough to give statistics related to the German economic sector. Destatis did not fail to give the figures explaining the drop in GDP.


Destatis' exact figures

According to these data, capital investment decreased by 6.9% in the first quarter of 2020. In addition, German consumption fell by 3.2% over the same period. As for exports, Destatis specifies that they fell by 3.1% in Q1. In other words, household consumption cut 1.7 percentage points from the German economy in the first three months of 2020. Net trade, on the other hand, cut 0.8 percentage points.

The forecasts for the second quarter are not favorable to Germany according to economists. The latter expect the decline in GDP to be stronger in the second quarter. They base themselves on the containment which was more concerned in the fourth month (April) and the fifth (May).

During these two months, several sectors came to a standstill. The first sectors to be rapidly affected remain tourism and catering.

Information: The Munich-based economic research institute Ifo announced the recovery of an important index. It is the index that informs about the business environment and has risen from 74.2 (April) to 79.5 (May). This is above the average of 78 expected by economists.