German economy: After the low point, what’s next?

The German economic data for the month of April, which have been published in the past few days, reveal the full extent of the current crisis. The industrial sector in particular has been hit extremely hard. The latest foreign trade data also show this.

Compared to March, German exports in April fell by almost a quarter. In seasonally adjusted terms this corresponds to a loss of almost 25 billion euros. The sharpest declines were in trade with those countries that were hit hardest by the corona pandemic. Exports to France and Italy, which were almost in total economic lockdown in April, fell by between 40 and 50 percent. Exports to the USA also fell by almost 36 percent.

Conversely, German companies also imported significantly fewer goods from abroad in April. This is mainly due to the fact that production in this country also had to be cut back sharply in April. Output in the manufacturing sector fell by more than 20 per cent in a month-on-month comparison, following a decline of a good ten per cent in the previous month. Meanwhile, new orders have actually fallen by around 40 per cent since February. Worldwide, the slump in the industrial sector in March and April was probably even more severe than in 2008/2009 during the global financial crisis.

Nevertheless, survey data from May show that the economic recovery has also begun with the loosening of corona measures. So the low point was probably passed in April and now things are looking up again. However, how quickly it can rise depends not least on how the global corona infection figures continue and how long individual restrictions have to remain in force.

It must be assumed that it will be a relatively long time before we can speak of „normal“ conditions again. This will probably only be the case once a vaccine has been found and the last restrictions on freedom of movement can be dropped. Until then, i.e. from today’s perspective probably until spring or summer 2021, we cannot expect a really dynamic upswing in Germany either.

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