ifo Institute: After an Unprecedented Crash, the German Economy Is Rebounding
Never before in Germany’s postwar history has economic output slumped as sharply as in the second quarter of this year. “The economy has taken an unprecedented plunge. However, it bottomed out during the pandemic and is now headed back upward, although not yet to its previous levels,” says Timo Wollmershaeuser, Head of Forecasts at ifo, regarding the figures released by Germany’s Federal Statistical Office. “For the year as a whole, economic output is expected to fall by around 5 percent.”
“The gradual lifting of restrictions led to a strong increase in retail sales in May, as consumers made many purchases they had been obliged to put off. Production and sales gradually rose again in other sectors of the economy as well,” Wollmershaeuser adds. In addition, the ifo Institute’s business climate has recently improved significantly in many companies. . “According to those findings, we should see a clear recovery in the second half of 2020.”
However, this forecast is based on assumptions about the further course of the epidemic and the political responses to it, both of which imply a high degree of uncertainty. In particular, the forecast assumes that the loosening of restrictions will continue without leading to a renewed widespread increase in infections.
In the labor market, recovery has so far been sluggish: unemployment peaked in June, but its seasonally adjusted decline in July was weak. According to ifo Institute estimates, the number of companies using short-time work is also declining very slowly: that figure is still above-average in several sectors, especially in the hotel and restaurant industry and in manufacturing. While industry is suffering primarily from a weak order situation, sales in the food and beverage sector are still limited by coronavirus restrictions.
