German economy stutters as COVID-19 curbs push up savings rate
Reuters
Published May 25, 2021 02:19AM ET
Updated May 25, 2021 06:06AM ET
By Michael Nienaber
BERLIN (Reuters) -The German economy shrank more than expected in the first quarter as coronavirus-related restrictions spurred householders to put more money than ever into savings, data showed on Tuesday.
Europe's largest economy contracted by 1.8% quarter on quarter and by 3.1% on the year, the Federal Statistics Office said. The readings, for which a Reuters poll had forecast drops of 1.7% and 3.0% respectively, were significantly weaker than the euro zone average.
German households' disposable income increased slightly as the government ploughed billions of euros into job protection schemes and cash handouts such as extra child benefits. But curbs linked to containing the pandemic also made it harder for consumers to spend it.
"The drop in consumption is colossal," VP Bank Group economist Thomas Gitzel said.
Household spending fell by 5.4% on the quarter as the savings rate rose to a record high of 23.2%.
Company investments in machinery and equipment fell slightly, though construction activity rose.
Exports increased by 1.8% on the quarter helped by strong demand from the United States and China, while imports rose 3.8%, meaning net trade pushed down overall growth as well.
The quarter-on-quarter GDP data compared with a euro zone average of -0.6 percent, and growth of 0.4% in France, while the economy of the United States - whose vaccination programme has progressed more rapidly - grew 1.6%.
Year on year, the euro zone economy shrank 1.8%.
VP Bank's Gitzel said falling infection rates and progress in inoculations meant the German economy would soon be back on a healthier footing as COVID-19 curbs were eased and then lifted.
"We're heading towards a relaxed summer in which retailers in German cities can expect consumers to splash out," Gitzel said.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.