German Economy Contracts In Q1

Germany's economy contracted in the first quarter due to the coronavirus pandemic after recovering slightly in the second half of 2020, data published by Destatis revealed on Friday.

Gross domestic product fell 1.7 percent sequentially, in contrast to the 0.5 percent growth seen in the fourth quarter of 2020. This was bigger than the economists' forecast of -1.5 percent.

GDP, on an unadjusted basis, declined at a faster pace of 3.3 percent annually in the first quarter after easing 2.3 percent in the previous quarter. Economists had forecast an annual fall of 3.6 percent.

Meanwhile, the decline in calendar-adjusted GDP slowed to 3 percent from 3.3 percent.

Compared with the fourth quarter of 2019, the quarter before the coronavirus crisis began, GDP was 4.9 percent lower in the first quarter of 2021.

Destatis said the pandemic has affected household consumption in particular, while exports of goods supported the economy.

A growth engine in the final quarter, the economy has become a drag on the entire Eurozone, Carsten Brzeski, an ING economist said. But not for too long.

Technical factors such as the reversal of stockpiling ahead of Brexit at the end of last year, the impact of the harsh winter weather on the construction sector, and supply chain disruptions have significantly blurred German GDP data in the first quarter, the economist noted.

Eurozone first quarter GDP data is due today. Economists expect the currency bloc to shrink 0.8 percent sequentially after falling 0.7 percent in the fourth quarter of 2020.