Economy weakens: German economy is losing momentum

Status: October 29, 2021 12:35 p.m.

The upswing in Germany has already lost some of its pace due to material shortages in the summer. The gross domestic product rose by 1.8 percent in the third quarter – mainly due to consumption.

Although the German economy remained on a growth path in the third quarter, despite persistent delivery bottlenecks, the increase was weaker than experts had forecast. The gross domestic product (GDP) grew by 1.8 percent compared to the previous quarter, announced the Federal Statistical Office in an initial estimate. Economists had expected growth of 2.2 percent. The pace is also slowing: Europe’s largest economy grew by 1.9 percent in the second quarter. Economic output is still below the pre-crisis level at the end of 2019.

Consumption as a vehicle for growth

The statisticians say that economic growth has been mainly driven by consumers’ willingness to spend. After all, the restrictions to combat the corona pandemic with the temporary closure of restaurants, fitness studios and shops were gradually relaxed from mid-May.

The industry, on the other hand, suffers from a shortage of materials and delivery bottlenecks, which are a consequence of the 2020 Corona crisis. Last year the demand collapsed. With the economic recovery, global demand is currently picking up again. Raw materials and intermediate products such as semiconductors are scarce and have become significantly more expensive. Despite well-filled order books, some companies have to cut production.

No “final spurt”

This has consequences for the coming months. The federal government and economists expect the economic recovery to slow down even more at the end of the year. This year, in view of the current supply bottlenecks and high energy prices around the world, the hoped-for “final spurt” will not come, said the Executive Minister for Economic Affairs Peter Altmaier (CDU) recently. He spoke of a historically unique shortage of intermediate goods.

With the steep rise in corona infections and the prolonged material shortages, the economic outlook has recently deteriorated significantly, said Jörg Krämer, chief economist at Commerzbank. “The German economy is unlikely to grow any more in the fourth quarter. We expect a further increase of 2.5 percent for the entire year 2021.”

Lower forecasts

The federal government lowered the growth expectations for 2021. After the corona-related slump in gross domestic product in 2020, the government expects economic output to increase by 2.6 percent this year. In April, a plus of 3.5 percent was predicted. Economic growth of 4.1 percent is now expected for 2022 instead of the previous 3.6 percent.

Leading economic research institutes had also lowered their economic forecast for this year significantly. They expect economic growth in Europe’s largest economy of 2.4 percent.

Higher growth in the euro zone

Among the euro countries, Germany only achieved below-average economic growth between July and September. The economic growth in the euro zone was 2.2 percent in the third quarter, as announced by the EU statistical office. Inflation in October was 4.1 percent in the euro countries overall, not quite as high as in Germany.

source site