German economy shrinks 1.7% in first quarter, worst in Europe


As rising COVID-19 infections forced shutdowns to be extended, the German economy fell 1.7% in the first quarter of 2021, numbers worse than elsewhere in Europe, official data showed on Friday.

“The coronavirus crisis caused a further decline in economic performance at the start of 2021,” the federal statistics agency Destatis said.

“This particularly affected household consumption, while exports of goods supported the economy.”

Analysts polled by Factset had expected a smaller contraction of 1.5%.

The weak start to the year in Europe’s largest economy contrasts sharply with the 0.5% expansion in gross domestic product (GDP) recorded in the fourth quarter of 2020, before more contagious viral variants upset the rebound of Germany.

Germany’s performance was also worse than first quarter data from other major European economies on Tuesday.

France announced a return to growth over the period from January to March to 0.4%, while Italy suffered a contraction of 0.4% and Spain fell by 0.5%.

Germany’s woes come as the country remains in the grip of a third wave of coronavirus that has hit the service sector, with restaurants, hotels and recreation centers all feeling the pain of extended shutdowns.

The situation is better in the crucial industrial sector, with German export-oriented car and machine manufacturers among those enjoying a faster recovery in key markets such as China.

Germany is also optimistic that progress in immunization and a gradual easing of restrictions will fuel a rapid rebound from the middle of the second quarter.

More than 25% of Germans have now had their first COVID-19 vaccine, and the country this week hit a record vaccination of more than one million people in a single day, becoming the first European country to do so.

Economy Minister Peter Altmaier on Tuesday lifted Germany’s forecast for the full year and said he now expects 3.5% growth in 2021, down from an earlier estimate of 3, 0%.

“This is the year when we will really see a trend reversal,” he said.

The recovery is expected to extend through 2022, with 3.6% growth for next year, according to government forecasts.

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