German economy grows at record pace ahead of second pandemic wave

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BERLIN (Reuters) – Germany’s economy grew by a record 8.2% in the third quarter as rising consumer spending and exports helped Europe’s biggest economy recover from its worst recession. of its history caused by the COVID-19 pandemic, according to data released Friday.

FILE PHOTO: The skyline with its financial district is pictured at sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany October 11, 2020. REUTERS/Kai Pfaffenbach

The jump in output from July to September was the largest since the Federal Statistical Office began collecting quarterly growth data in 1970 and was stronger than the 7.3% increase predicted by the economists in a Reuters poll.

The jump follows an unprecedented fall of almost 10% in the second quarter, when household spending, business investment and trade collapsed during the first wave of the pandemic.

“The deeper you push a ball underwater, the higher it jumps. This also applies to the economy,” said DekaBank analyst Andreas Scheuerle.

An aggressive second wave of infections and a new partial lockdown to slow the spread of the disease are now clouding growth prospects for the fourth quarter and beyond.

The stronger-than-expected rebound in the third quarter was driven by higher private consumption, a rebound in equipment investment and strong exports, the statistics office said.

Preliminary data didn’t include many details, but automakers and engineering associations pointed to surprisingly strong demand from China in recent months.

In addition, the German government on Friday revised upwards its estimate of gross domestic product this year. He now expects GDP to contract 5.5% in 2020, down from a previous estimate of a 5.8% decline. Adjusted for calendar effects, he sees the economy contracting by 5.9%.

The government has confirmed its forecast for 2021 of the economy growing by 4.4% despite the second wave of infections and the partial lockdown. Bars, restaurants, cinemas and gyms will be closed from Monday until the end of November. Schools and shops will remain open under certain conditions.

The government plans to compensate companies affected by the lockdown by paying them up to 75% of their sales from November last year. Finance Minister Olaf Scholz has earmarked 10 billion euros for this new aid package.

Since March, the government has launched massive rescue and stimulus measures, including cash transfers to parents and a temporary reduction in value added tax, which together appear to have stabilized domestic demand.

But in a sign that some consumers are holding back despite relatively stable jobs and incomes, retail sales fell more than expected during the month of September, according to separate data.

Compared to February, the month before the coronavirus outbreak in Germany, retail sales in September were up 2.8%.

Reporting by Michael Nienaber; edited by Thomas Seythal, Maria Sheahan, Larry King

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