“Will Get Worse” – Virus Pushes Germany Into Recession

Despite the downturn, Germany has fared better than France and Italy.
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Courtesy of ZeroHedge

The German economy fell into recession after recording the sharpest quarterly contraction since the 2009 financial crisis as coronavirus-related shutdowns decimated the end of the first quarter, data showed on Friday. The 2.2% first-quarter contraction is a preview of what is to come. The second quarter could decline by as much as 10%, Federal Statistics Office official Albert Braakmann warned.


Braakmann said the Statistics Office is not in the game of making predictions but added: "The forecasts – as you probably know – are for around -10%."

A much deeper contraction is guaranteed during the second-quarter because more of the lockdown was captured. Lockdowns were in full effect for much of April, with shops and factories shuttered as cases and deaths in the country soared.

On the year, the Statistics Office showed the economy declined by 2.3% over the first-quarter, which followed a lousy expansion of .40% in the last quarter of 2019.

Despite the downturn, Germany has fared better than France and Italy, which recently recorded first-quarter contractions of 5.8% and 4.7%, respectively.

"Things will get worse before they get better," Carsten Brzeski of ING told Reuters while referring to Germany's economy. "To be more precise, incoming data will be worse, even though the worst might already be behind us."

He added: "If today's data are the result of two weeks of lockdown, three more weeks of lockdown and a very gradual lifting of some measures do not bode well for the second quarter."

The economic effects of the countrywide lockdown have been absolutely devastating. Several weeks ago, we showed how the country's labor market has been obliterated.


With lockdowns being eased in Germany, alarm bells have been ringing of a possible second coronavirus wave as confirmed case accelerate. News that the "reproduction rate" surged back to 1.1 in the country this week casts a dark shadow over the reopening of the economy. A print over 1 means the virus is spreading exponentially and would likely trigger the next wave. Reversing the easing of restrictions would prove disastrous and could lead to a double-dip recession, if not depression.


 Fears of a second wave of infections led to much of the risk-off sentiment in global stocks this week.


Threats are rapidly emerging of a second wave that could be materializing in Germany, China, Singapore, and now South Korea, which serves as a glimpse into America's reopening and what it means in the coming weeks or months.