German economy is growing again, uncertainties remain

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The German economy has returned to growth after the emergency at the beginning of the year in the corona pandemic. The gross domestic product (GDP) rose in the second quarter of 2021 compared to the previous quarter by 1.5 percent, as the Federal Statistical Office announced on Friday based on preliminary data. The economic recovery in the spring was mainly supported by higher private and government consumer spending.

At the beginning of 2021, new restrictions in the course of combating the coronavirus, among other things with closings of parts of the retail trade, once again slowed the German economy. According to the latest data, the gross domestic product shrank by 2.1 percent. From May, the restrictions were gradually relaxed again.

Economists assume that private consumption in particular will drive the economic upturn in the coming months. In private households, the lockdowns had led to a consumption backlog with unprecedented savings.

The industry, on the other hand, complains about disruptions in global supply chains and material shortages. The manufacturing industry is sitting on full order books, but is often unable to process orders due to delivery bottlenecks for raw materials and intermediate products.

Compared to the second quarter of 2020, gross domestic product grew by 9.6 percent in the period from April to June 2021, adjusted for price. In the first lockdown after the outbreak of the corona pandemic last spring, economic performance collapsed dramatically.

Economists expect Europe’s largest economy to make a strong comeback this year. Economic research institutes recently predicted an increase in gross domestic product of between 3.2 and 3.9 percent. Last year, the pandemic plunged the German economy into the deepest recession since the global financial crisis in 2009.

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In addition to delivery bottlenecks, however, the spread of the delta variant of the corona virus is currently causing uncertainty. The mood in the German economy surprisingly clouded over in July. The companies surveyed by the Munich Ifo Institute were more skeptical about future business in particular. “Delivery bottlenecks for preliminary products and worries about increasing numbers of infections are burdening the German economy,” explained Ifo President Clemens Fuest.


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