German GDP fell less than forecast in the second quarter

According to the report from Federal Statistical Office (Destatis), the gross domestic product (GDP) fell sharply by 9.7% in the 2nd quarter of 2020 on the 1st quarter of 2020 after adjustment for price, seasonal and calendar variations. Economists had expected a 10.1% decrease. The GDP drop in the 2nd quarter of 2020 was not quite as steep as reported in the first release of 30 July 2020 (-10.1%). The slump in the German economy was thus much larger than during the financial and economic crisis of 2008/2009 (-4.7% in the 1st quarter of 2009) and the sharpest decline since quarterly GDP calculations for Germany started in 1970.

As a consequence of the ongoing corona pandemic and the restrictions related with it, household final consumption expenditure fell sharply by 10.9% in the 2nd quarter of 2020 compared with the 1st quarter after price, seasonal and calendar adjustment. Gross fixed capital formation in machinery and equipment even dropped by as much as 19.6%. Gross fixed capital formation in construction also declined markedly (-4.2%) in the 2nd quarter, which was due in particular to the exceptionally strong 1st quarter (+5.1%). Only final consumption expenditure of general government had a stabilising effect; it was 1.5% higher than in the previous quarter and prevented an even larger GDP decrease.

The trade with foreign countries also slumped. In the 2nd quarter of 2020, exports of goods and services dropped by 20.3% on the 1st quarter 2020 after price, seasonal and calendar adjustment. Imports also recorded a double-digit decline of 16.0%. This means that the decreases were even markedly larger than during the financial and economic crisis in the 1st quarter 2009 (exports: -11.0%; imports: -5.9%). In the 1st quarter of 2020, at the beginning of the coronavirus crisis, exports had already dropped by 3.3% and imports by 1.9%.

The German economy shrank also in a year-on-year comparison. GDP was down a price-adjusted 11.3% in the 2nd quarter of 2020 (also calendar-adjusted) on a year earlier. Again, such large decreases had not been observed even during the financial and economic crisis of 2008/2009. The largest decrease on the same quarter of the preceding year had been recorded in the 2nd quarter of 2009 (-7.9%).