Since the global financial crisis in the first three months of the year, the economy of Germany shrank at the fastest pace. Compared to the previous quarter, the gross domestic product (GDP) contracted by 2.2%.
The agency of the country’s statistics said that the consumption of households fell sharply. Thus, investment in equipment and machinery plummeted. Meanwhile, both exports and imports saw a sharp decline compared to the fourth quarter.
Moreover, since the German reunification in 1990, in the first quarter, the contraction was the second largest.
Revised Gross Domestic Product data showed that the economy of the country shrank slightly in the final three months of last year. It means that the largest economy of the eurozone is currently in an official recession.
Thus, Germany joined Italy and France in recession. Nevertheless, Germany still ended in better shape in the first quarter that the eurozone’s second and third-biggest economies. In France, first-quarter gross domestic product declined by 5.8%. In Italy, first-quarter gross domestic product decreased by 4.7%.
The difference is that Germany did not introduce strict measures of social distancing. It was until the relatively late date of March 22.
Nevertheless, the worst still must come. Jack Allen-Reynolds works at Capital Economics. He said that he forecast German gross domestic product to decline in the second quarter by 10%.
Allen-Reynolds said that the lockdown is being eased in May and June. Nevertheless, that is only gradual. The recovery of Germany will be constrained by the problems elsewhere in Europe.
Gross Domestic Product
Since the coronavirus pandemic started, Production at factories of China is growing for the first time. That is what journalist Laura He reports. Thus, it is good news. Nevertheless, it does not mean that the world’s second-largest economy will return, anytime soon, to full strength.
Compared to a year earlier, the economy of China shrank 6.8% in the first quarter.
This year, the International Monetary Fund still forecasts gross domestic product of China to grow 1.2%. Analysts are warning that the recovery of the country will be drawn out.
It is comparably easy for Beijing to get its state-backed construction and manufacturing companies into the game. Nevertheless, more difficult will be to encourage consumers to spend.
Moreover, from a year earlier, retail sales in China dropped 7.5% in April. It is according to data released on Friday. Thus, it suggests that the finances of the household remain strained. After easing back, a bit in March, unemployment rose again.
Economists from Societe Generale said that investment did better than consumption. Infrastructure, finance, and property outperformed on the back of credit stimulus. The disappointment in retail sales might continue. It is because income outlook and unemployment remain challenging. It is what economists wrote in the research note.
The economic recovery of China has already been for months underway. Even the epicenter of the pandemic, Wuhan, emerged from lockdown on April 8.
Thus, it means that countries still struggle to contain the coronavirus. They have to months and months before their economies can start to recover. Moreover, some can face a lost year.
Let us hope that gross domestic product will continue to rise.
- Trading Instrument