ifo Institute: New Lockdown in Germany Brings Economic Recovery to an Abrupt End
The lockdown announced by the German government will significantly slow down the increase in economic output in the fourth quarter of 2020, according to rough calculations by the ifo Institute. “The measures decided on will bring the strong recovery from the summer to an abrupt end,” says Timo Wollmershäuser, Head of Forecasts at ifo. “Expenditure on ‘social consumption’ services will nosedive, which means that overall private consumer spending is unlikely to grow for the rest of the year.”
According to calculations by the ifo Institute, the lockdown is likely to result in a loss of overall economic production of just over EUR 10 billion. This is based on the following assumptions: Sales in the hospitality industry will fall from 75 percent of the normal level, as reached in the summer, to around 20 percent. Sales for the remaining providers of “social consumption” services are expected to decrease from an estimated 30 percent to just 10 percent. These include recreational and cultural services, vacation packages, and personal care services, where recovery had been slow in the summer.
In calculating the shortfall, ifo researchers continue to assume that sales had already fallen in October. This is because private households may have altered their behavior simply because of the increasing number of new coronavirus infections.
A slow recovery was assumed for December. The calculations did not take into account indirect effects that measures imposed in other countries would have on the German economy.
