QIII-2021 QUARTERLY REPORT GERMANY
Recovery losing steam Pre-crisis levels within reach by yearend
▪
German industry expects economic output to increase three percent in real terms this year. We previously forecast growth of 3.5 percent. Despite strong growth in the second quarter, economic recovery in 2021 is set to be slightly weaker than expected back in June.
▪
Adjustment in forecast triggered by expected stagnation in private consumption expenditure in 2021. On account of the weak performance in the first half of the year, the annual growth rate of one percent previously predicted for private consumption expenditure is no longer within reach.
▪
Investment in plant and equipment still predicted to increase by seven percent this year. Capacity utilisation in several manufacturing industries is above the long-term average. We expect domestic demand for capital goods to remain high as companies will need to invest in expansion as well as replacement.
▪
Industry has not really kicked into gear in the first six months of the year. Despite a high volume of orders, industrial production fell 1.2 percent in the second quarter 2021 compared to the previous quarter. For the year overall, we expect output to increase by eight percent due to base effects.
▪
For 2021 overall, we continue to expect exports of goods and services to rise 8.5 percent in real terms. Trade with EU partner countries and the United States is going very well. Business with China has lost a little momentum. Rising exports will not automatically lead to a sustained economic peak: problems in global supply chains, high logistics costs and unresolved trade disputes are clouding the economic environment.
Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Content German economy ................................................................................................................................ 3 Strong economic recovery in second quarter fuelled by buoyant services sector ................................ 3 Foreign trade bounces back from major slump last year ...................................................................... 4 Labour market: employment rises despite summer doldrums .............................................................. 6 Incoming orders: industry order books continue to swell ...................................................................... 7 Industrial production: recovery constrained by supply bottlenecks ....................................................... 8 Capacity utilisation now higher than before the pandemic .................................................................. 10 Sales in manufacturing almost back to pre-crisis levels ..................................................................... 11 Business climate: less optimistic prospects weigh down sentiment ................................................... 12 Outlook ............................................................................................................................................... 13 Imprint ................................................................................................................................................ 15 Basic data for national accounts ..................................................................................................... 16
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
German economy Strong economic recovery in second quarter fuelled by buoyant services sector The German economy has recovered from its pandemic-induced slump at the start of the year. After a quarter-on-quarter drop of two percent in the first quarter 2021, German gross domestic product (GDP) rose 1.6 percent in the second quarter following seasonal and calendar adjustment, according to figures published by the German Federal Statistical Office. Economic output was 3.3 percent lower than before the outbreak of the pandemic. Compared to the previous year, German economic output has nonetheless expanded robustly. Real GDP was 9.4 percent higher than in the second quarter 2020 following price and calendar adjustment. The other major EU countries recorded even higher levels of growth, with Spain up 19.8 percent, France 18.7 percent and Italy 17.3 percent, but these countries were also hit by a much deeper slump during the first wave of the coronavirus pandemic. In the EU overall, economic output increased by 13.2 percent according to preliminary Eurostat calculations. Germany’s economic output in the second quarter 2021 was generated by a workforce of 44.72 million. That is 4,000 more than one year ago. Compared to pre-crisis levels, however, there are still 500,000 more people out of employment. The labour volume measured in the number of working hours was 6.8 percent higher year on year, but 4.5 percent lower than in the fourth quarter 2019 following seasonal adjustment. Gross value added grew by ten percent in the second quarter 2021 compared to the previous year. All economic sectors expanded apart from agriculture and forestry, and financial and insurance service providers. So far, only construction and information and communication services have managed to surpass their pre-crisis levels (fourth quarter 2019) of gross value added although public service providers, real estate and financial and insurance providers all came close. In retail, transport and hospitality, gross value added was 6.2 percent below its pre-pandemic level. In manufacturing and corporate services, gross value added was 5.9 percent lower in each case. These three sectors combined account for just over half of gross value added in Germany. On the expenditure side of GDP, consumption expenditure of private households turned up, rising six percent in the second quarter 2021 after falling for five quarters straight. Spending on hotels and restaurants increased by 6.7 percent, benefiting from the lifting of restrictions that started in spring. Private households also spent substantially more on leisure, entertainment, and culture (up 9.5 percent), clothing and shoes (up 7.5 percent) and transport and communication services (up 16.6 percent) than one year ago. Expenditure on home furnishings and household goods, on the other hand, only increased by a moderate 2.4 percent. Spending on housing, water, electricity, and heating (up 0.5 percent) and on food, beverages, and tobacco (up 0.4 percent) remained more or less steady. Compared to the fourth quarter 2019, the last quarter before the outbreak of the pandemic, private households spent more than six percent less on consumption. The most recent figures show that spending on hotels and restaurants is half what it was before the pandemic, with spending on clothing and shoes, and leisure, entertainment, and culture down by about one sixth. State consumption expenditure lost a little momentum, with growth down to 3.7 percent. Total consumption expenditure in the spring quarter was therefore only 5.3 percent higher than in the same period last year.
3
Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Growth in real GDP in percent 10 8 6 4
2.7 1.1
2
1.1
0 -2 -4 -6
-4.6
-8 -10 -12 I
II
III
IV
I
II
2017
III
2018
IV
I
II
III
IV
2019
I
II
III
2020
IV
I
II
III
IV
2021
change over previous year quarter change over previous quarter change over previous year Source: Federal Statistical Office
After a minor dip at the start of the year, gross fixed capital formation rose 7.5 percent in the second quarter 2021 following price adjustment. Construction investment in residential buildings increased by 3.8 percent and in non-residential buildings by 1.5 percent. Investment in other assets (patents and licences) grew 2.6 percent. Investment in plant and equipment surged up 20.4 percent in the second quarter following minimal growth in the first quarter. This is the strongest rate of growth seen here since the start of the data series in 1992. The export of goods and services was up 26.5 percent in the second quarter following price adjustment. While goods exports increased 31.6 percent year on year, exported services only grew by a moderate 5.9 percent. Among imports, imported goods increased 21.7 percent and imported services rose 14.2 percent. As exports outperformed imports, net exports were positive, contributing 3.3 percentage points to GDP growth in the second quarter 2021. Foreign trade bounces back from major slump last year The latest figures show that German exports have recovered from their major slump last spring. In the second quarter 2021, German exports increased by 84.5 billion euros or 34.8 percent compared to the same period last year to reach 327.3 billion euros (country-specific seasonally adjusted data is not available). Compared to the second quarter 2019, this represents an increase of 2.8 percent. The strongest growth, in absolute terms, was in trade with the US. Exports destined for the United States grew by 9.3 billion euros or 46 percent. Among EU partner countries, exports increased above average to France (up 39.7 percent), Italy (up 50 percent) and Poland (up 46.8 percent). Exports to the United Kingdom also rose by an above-average 36.1 percent to total 15.9 billion euros, which is still 12.4 percent lower than before the pandemic in 2019.
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
German exports and imports in Q2 2021 in selected countries Year-on-year change increase (+) or decrease (-) in exports in million euros
increase (+) or decrease (-) in imports
in %
in million euros
in %
USA
29 408
+ 9 321
+
46.4
Belgium
13 809
+ 5 531
+
66.8
France
25 973
+ 7 375
+
39.7
Netherlands
25 044
+ 5 126
+
25.7
Italy
18 785
+ 6 258
+
50.0
Italy
16 307
+ 4 799
+
41.7
Poland
18 979
+ 6 051
+
46.8
Poland
16 707
+ 4 507
+
36.9
Netherlands
24 118
+ 5 234
+
27.7
USA
18 957
+ 4 054
+
27.2
Austria
17 852
+ 4 800
+
36.8
Czech Republic
12 706
+ 4 010
+
46.1
Great Britain
15 869
+ 4 209
+
36.1
Russia
7 634
+ 3 725
+
95.3
Spain
11 337
+ 4 002
+
54.6
France
15 281
+ 3 560
+
30.4
Czech Republic
12 024
+ 3 983
+
49.5
Austria
11 817
+ 2 968
+
33.5
China
26 311
+ 3 697
+
16.3
Hungary
7 571
+ 2 259
+
42.5
Belgium
12 667
+ 4 499
+
38.2
South Sudan
3 423
+ 2 158
+ 170.7
Hungary
7 334
+ 2 680
+
57.6
Switzerland
12 568
+ 1 973
+
18.6
Sweden
6 715
+ 1 667
+
33.0
China
31 977
+ 1 878
+
6.2
Russia
6 675
+ 1 607
+
31.7
Spain
8 608
+ 1 560
+
22.1
Japan
6 073
+ 1 391
+
29.7
-
583
-
36.9
+ 64 402
+
29.6
Egypt Marshall Islands Insgesamt
960
-
154
-
13.8
12
-
589
-
98.0
Singapore
998
+ 84 538
+
34.8
Insgesamt
282 301
327 341
Sources: Federal Statistical Office, own calculations
German imports also recorded a clear recovery in the second quarter. Compared to the same quarter last year, imports increased by 64.4 billion euros or 29.6 percent to 282.3 billion euros. Compared to the second quarter 2019, this represents an increase of 6.9 percent. The strongest growth in nominal terms of over five billion euros in each case was in imports from Belgium and the Netherlands. Imports also rose sharply from Italy (up 41.7 percent) and Poland (up 36.9 percent), exceeding levels from two years ago. The volume of imports from France and Spain, in contrast, were still 9.2 percent and 4.5 percent respectively below pre-crisis levels. Imports from the United States grew below average,
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
going up 27.2 percent. Imports from China increased 6.2 percent year on year to just short of 32 billion euros. In July 2021, exports increased 12.4 percent compared to July 2020. Imports were slightly stronger, going up 16.6 percent. Compared to February 2020, the month before restrictions were introduced in Germany to stop the spread of the coronavirus, exports were 1.6 percent higher and imports 5.9 percent higher after calendar and seasonal adjustment. In the first seven months of the current year, 16.1 percent more goods were exported than in the same period the previous year. Exports to EU countries went up 20.2 percent, clearly outperforming exports to third countries (up 11.5 percent). Imports increased by a total of 15.6 percent in the first seven months of the year. The volume of goods and services imported from EU countries rose 18.1 percent year on year. Imports from EU member states outside of the euro area (up 20.0 percent) slightly outperformed imports from euro area countries (up 17.2 percent). Imports from third countries only expanded 12.7 percent in the same period Labour market: employment rises despite summer doldrums Despite the summer low, the situation on the labour market has improved markedly. According to preliminary data from the German Federal Statistical Office, the number of people in employment rose by 100,000 in July 2021 following seasonal adjustment. This follows on from an increase of 20,000 in May and 83,000 in June. Compared to July 2020, the number of people in employment was up by 0.6 percent to 44.97 million. Employment subject to social security contributions also continued its upward trend. According to projections of the German Federal Employment Agency for June 2021 (latest available figure), the number of people in such employment totalled 33.79 million, which is 463,000 or 1.4 percent more than one year ago. German labour market* 34
4 Unemployed persons (right axis) 3
32 2 Employed persons covered by social security (left axis) 1 30 0
28
2013 2012
2014 2013
2015 2014
2016 2015
2017 2016
2018 2017
2019
2020
2 2021
-1
Difference in the number of workers making social security contributions from the same month last year (right axis) *seasonally adjusted in million Source: Federal Employment Agency
The number of workers in full-time employment subject to social security contributions was 203,000 or 0.9 percent higher year on year. The number of workers in part-time employment was 260,000 or 2.7 percent higher year on year. The employment figures for other forms of employment were down
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
compared to the same month last year. The number of self-employed including contributing family members dropped by 125,000 or 3.1 percent to 3.93 million. The number of people exclusively in marginal employment also declined, going down by 126,000 or three percent to 4.13 million in June, according to preliminary figures from the Federal Employment Agency. The number of unemployed people decreased by 365,500 or 11.1 percent in August 2021, falling to 2.91 million. Seasonally adjusted unemployment has now pointed down for fourth consecutive months. The unemployment rate in August this year was at 5.5 percent as calculated by the Federal Employment Agency, or 3.6 percent according to the ILO definition. Incoming orders: industry order books continue to swell According to preliminary figures, incoming orders for German industry increased 3.4 percent in July 2021 compared to the previous month and following seasonal and calendar adjustment. Factoring in large orders, however, incoming orders were down by 0.2 percent in July. The preliminary figures for June were upwardly revised to 4.6 percent higher than May (previously: up 4.1 percent). Compared to the same month last year, the midst of the pandemic, orders were up 24.2 percent. Domestic demand dropped 2.5 percent compared to the previous month, due to a sharp spike in demand in that month. Demand from abroad increased by just under one sixth on the back of strong demand from third countries, which rose eight percent. At the same time, orders from within the euro area were 4.1 percent lower than in June.
New orders, manufacturing 120
35
115 25
110 105
15 7.8
100
2.5
3.3
5.3
95 90
5 -5
85 -15
80 75
-25
70 65
-35 2017
2018
2019
2020
2021
Change over previous year, two-month-average, in percent (right axis) Volume index in manufacturing, two-month-average, seasonally adjusted (left axis) Change over previous quarter (q-o-q), in percent Source: Federal Statistical Office
Based on the revised June figures, the volume of incoming orders in the second quarter 2021 was 3.3 percent up on the first quarter 2021 following calendar and seasonal adjustment. This was also the fourth consecutive quarterly rise in incoming orders. Compared to pre-crisis levels (fourth quarter 2019), the volume of new orders was up by 10.7 percent. Looking at the origin of orders in the second
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
quarter, domestic orders expanded 5.8 percent compared to the previous quarter. Orders from abroad rose much less, going up 1.6 percent. Demand from within the euro area picked up 4.3 percent, while orders from third countries dipped by a minimal 0.1 percent. Compared to pre-crisis levels, demand from within Germany and from third countries was up by more than 13 percent in both cases. Demand from the euro area was only 1.3 percent higher than before the crisis. Among the main groups of industrial goods, incoming orders for intermediates were up by a slight 0.3 percent in the second quarter 2021 compared to the previous quarter. While orders from at home increased marginally, orders from abroad stagnated. Despite momentum tailing off slightly, orders were nonetheless up by a clear 15 percent on pre-crisis levels (fourth quarter 2019). Capital goods producers received 5.2 percent more orders in the second than in the first quarter 2021, fuelled primarily by a major increase in domestic orders of 10.6 percent. Foreign demand for capital goods only increased by 2.2 percent in the same period. Compared to pre-crisis levels, orders were up 11.2 percent. Orders for consumer goods increased by 3.8 percent quarter on quarter in the second quarter 2021. Domestic orders, going up 5.7 percent, comfortably outperformed orders from abroad which rose 2.6 percent. New orders for consumer goods in the second quarter were not only 6.1 percent higher than pre-crisis levels but also set a new all-time record. On account of supply shortages for specific intermediates, manufacturers are not presently able to work through the high volume of orders and their order books are swelling. According to figures from the ifo Institute, the reach of orders in hand in manufacturing climbed to a new record high of 3.7 production months at the beginning of the third quarter 2021. Among the main industrial groups, orders in hand among consumer goods producers rose by a clear 0.7 months to reach 2.7 production months. Among the producers of intermediates, the backlog of orders dropped off slightly to three months. Producers of capital goods needed 4.2 months to complete their orders in hand. According to figures from the German Federal Statistical Office, the backlog of orders in manufacturing in June 2021 was up by 2.8 percent on the previous month. With this increase, orders in hand reached their highest level since this data series began in January 2015. Domestic orders in hand increased by four percent while orders in hand from abroad rose 2.2 percent. Industrial production: recovery constrained by supply bottlenecks In July 2021, industrial production (manufacturing excluding energy an d construction) increased by 1.3 percent compared to the previous month and following seasonal and calendar adjustment. Figures for June were revised upwards slightly to one percent down on May (previously: minus 1.3 percent). Compared to the same month last year, production increased 6.4 percent. Compared to February 2020, the last month before restrictions were imposed to stop the spread of the pandemic, production was 6.3 percent lower following seasonal and calendar adjustment. Energy production dropped for the third consecutive month in July, this time by 3.2 percent. Activity in the construction sector, on the other hand, expanded by 1.1 percent compared to the previous month. In manufacturing overall, production increased by one percent in July 2021.
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Production development in the manufacturing industry year on year change in percent 2019 2020 2021 year Q4 Q1 Q2 original value calendar adjusted
compared to previous period in percent 2020 2021 Q4 Q1 Q2 May Jun Jul seasonally and calendar adjusted
Production
- 3.3
- 7.3
- 1.7
- 1.7
15.8
6.0
- 0.7
- 0.4
- 0.8
- 1.0
1.0
Industry
- 4.2
- 9.6
- 3.0
- 1.2
19.6
6.4
0.0
- 1.2
- 0.7
- 0.7
1.3
Intermediate goods
- 3.6
- 6.1
1.1
2.3
21.9
7.8
2.1
0.6
0.7
- 0.9
- 0.5
Capital goods
- 4.5
-14.6
- 6.0
- 3.3
22.1
7.7
- 1.9
- 4.6
- 3.5
- 2.9
3.2
Consumer goods
- 4.7
- 3.7
- 3.4
- 3.3
8.8
0.5
0.2
2.4
3.1
3.4
0.9
Energy
- 7.2
- 7.2
- 2.7
- 2.3
11.8
3.0
- 1.9
2.3
- 2.9
- 1.8
- 3.2
Construction industry
3.3
3.3
5.0
- 4.6
1.9
5.3
- 4.2
2.6
- 0.8
- 1.9
1.1
Construction industry proper
5.9
5.9
2.9
- 3.0
2.6
0.4
- 0.3
3.0
- 1.2
- 0.2
- 0.5
Finishing industry
1.0
0.0
6.6
- 6.2
1.2
10.1
- 7.7
2.3
- 0.4
- 3.6
2.8
Sources: Federal Statistical Office, own calculations
Despite the upward revision of the June figures, industrial production in the second quarter 2021 dropped 1.2 percent compared to the previous quarter following seasonal and calendar adjustment. Year on year, output was up by 19.6 percent on account of the low output levels last year. Energy production increased by 2.3 percent compared to the previous quarter following seasonal and calendar adjustment. Year on year, energy production increased 11.8 percent. With little activity during the first quarter due to poor weather, construction grew by 2.6 percent in the second quarter. Compared to same period last year, construction activity was up by 1.9 percent . Among the main industrial groups, production in the second quarter 2021 played out as follows: producers of intermediates increased their output for the fourth consecutive quarter, this time by 0.6 percent compared to the previous quarter. Compared to the second quarter 2020, production was up 21.9 percent. The production of capital goods decreased by 4.3 percent compared to the previous quarter, following a drop of 1.9 percent at the start of the year. Year on year, production was up 22.4 percent, the first growth seen here in three years. Production among consumer goods producers was 2.3 percent higher than in the previous quarter and 8.7 percent higher than in the same quarter last year. Industrial activity is not yet running smoothly. The reason for this is definitely supply shortages as orders are still coming in nicely. Trends within the industrial sector are mixed. The latest figures for the chemical and pharmaceuticals industry and the electrical and electronics industry show output continuing upwards. On the other hand, particularly vehicle production is faltering with output sliding down by more than ten percent in the second quarter 2021 compared to the previous quarter. This will undoubtedly have a negative knock-on effect for metalworking companies. Output in machinery manufacturing also dropped slightly. The constraints in vehicle production are likely to take some
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
time to remedy. Production across other industries is expected to increase. According to the ifo Institute, capacity utilisation here has continued to climb in the third quarter.
Production, manufacturing 110
40 30
100
20 10
6.4 90
0.0
0.5
0
-1.2 -10
80
-20 70
-30 2017
2018
2019
2020
2021
Change over previous year, two-month-comparison, in percent (right axis) Volume index in manufacturing, two-month-average, seasonally adjusted (left axis) Change over previous quarter (q-o-q), in percent Source: Federal Statistical Office
Capacity utilisation now higher than before the pandemic Despite the supply shortages, the production capacity utilisation rate in manufacturing continued to increase. According to figures from the ifo Institute, capacity utilisation in manufacturing stood at 87.1 percent at the beginning of the third quarter, up on the previous quarter by 1.2 percentage points. Capacity utilisation was therefore three percentage points higher than the average for the last ten years and higher than before the outbreak of the pandemic. Capacity utilisation in manufacturing excluding food increased slightly more (by 1.3 percentage points) putting the rate at 3.2 percentage points higher than the average for the last ten years. Development in the individual industries diverged. Capacity utilisation increased at an unusually high rate in both the furniture industry and in textiles, rising six percentage points and 9.9 percentage points respectively compared to the previous quarter. In both industries, the capacity utilisation rate is now well above the average for the last ten years. Producers of metal goods and machinery also expanded their capacity utilisation above average, with increases of 2.6 percentage points and 2.1 percentage points respectively. The electrical and electronics industry had already raised its capacity utilisation sharply in the first half of the year and the latest figures show only small additional increases. Capacity utilisation in the chemical and pharmaceuticals industry only changed marginally. Vehicle production was noticeably affected by the supply bottlenecks in semiconductors. Capacity utilisation here dropped by 4.2 percentage points, down to 85.6 percent which is also below the average for the last ten years.
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Sales in manufacturing almost back to pre-crisis levels The manufacturing sector recorded a steep year-on-year increase in sales of 31.8 percent in the second quarter on account of the poor performance last year due to the pandemic. However, sales were also three percent higher than in the previous quarter. Compared to the fourth quarter 2019, the last quarter before the outbreak of the pandemic, sales were only 0.6 percent lower. In the first six months of the year, sales in manufacturing were 14.7 percent higher than in the same period last year.
Manufacturing revenue* January till June 2021
Motor vehicle production
31.3
Metal production and metalworking sector
23.7
Wood processing
18.0
Electronic industry
16.9
Chemical industry
15.5
Manufacturing
14.7
Pharmaceuticals
9.7
Glass, ceramics, stone, industrial minerals
9.7
Machinery manufacturing
7.5
Paper and pape
6.4
Textiles, fasion, leather
5.4
Other transport equipment production Food, beverages, tobacco
1.6 -4.2
*change in percent, year on year Source: Federal Statistical Office
Among the individual industries, sales in vehicle production rose the most, going up by 31.1 percent compared to the same period last year, followed by metal producing and metalworking companies which increased sales by an impressive 23.7 percent. Sales in the electrical and electronics industry exceeded the pre-pandemic level for the third quarter in a row. In the first six months of the year, sales in this industry rose 16.9 percent. The chemical industry posted an outstanding performance with sales in excess of 41 billion euros in the second quarter. In the first six months of the year, sales in the chemical industry increased at an unusually steep rate of 15.5 percent. In machinery manufacturing, sales rose by a below-average 7.5 percent. The performance of the paper industry and textiles was also disappointing, with sales increasing by 6.4 percent and 5.4 percent respectively. The food and beverage industry recorded a decrease in sales of 4.2 percent.
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Business climate: less optimistic prospects weigh down sentiment In August 2021, the ifo business climate index for Germany dropped for the second time in a row. As in July, the companies surveyed were less optimistic about their business prospects. Current business, in contrast, was again rated as improved. Looking at the individual sectors, the business climate in services also deteriorated. While service providers rated their current business situation as substantially improved, their prospects for the next six months were considerably diminished. Business sentiment in wholesale and retail recorded dropped tangibly. For the first time in five months, wholesalers and retailers were less positive about their current business situation and the majority were less optimistic about their prospects. Retailers, in particular, were worried about the future. Mainstream construction was an exception here. Construction companies were not only pleased with their current business but were also more optimistic about the next six months. In manufacturing, the business climate has clouded over tangibly. For the first time since April 2020, companies rated both current business and the prospects for the next six months as worse than in the previous month. The ifo economic barometer for manufacturing is still in the boom quadrant. The export expectations of industry have also declined for the second time in a row but are still rated as positive by the majority of companies surveyed.
ifo Business-Cycle Clock German manufacturing*
30
Jan 2011
Upswing
Boom
Business expectations for the next six month
20 10
August 2021
Jan 2021
Jan 2010
0 Jan 2019
Jan 2020
-10 -20 -30 -40
Jan 2009
-50 Reccession
Downswing
-60 -60
-50
-40
* Balances, seasonally adjusted
-30
-20
-10
0
10
20
30
40
50
60
Assesment of current business situation
Source: ifo Institut
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Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Outlook The German economy has only really managed to regain its footing in the course of the second quarter as the restrictions to stem the pandemic remained in place until well into spring. In contrast to the second half of last year, in which momentum came from manufacturing, growth in the second quarter 2021 was spurred by the services sector. Business has picked up above all in contact-intensive sectors such as retail and hospitality. Despite the recent improvements in consumption opportunities, private consumption spending in the first six months of 2021 were two percent lower than in the same period last year. The prospects for the second half of the year remain good. During the summer months, the number of workers on short time dropped as did the number of unemployed, which is unusual for this time of the year. With just under 45 million people in employment, there are only 193,000 fewer people in employment than before the outbreak of the pandemic. According to the consumer research organisation, GfK, sentiment among consumers is still on a high level. The economic and income prospects of consumers in August 2021 were markedly better than one year ago. Only the propensity among consumers to make large purchases has dropped compared to this time last year. Higher prices, mask mandates and distancing regulations have dampened consumers’ propensity to shop. Retail sales were nonetheless 3.8 percent higher in July 2021 than in the pre-crisis month of February 2020 in real terms. We expect the consumption spending of private households to continue to climb up in the second half of the year. On account of the weak upward trend in consumption in the first half of the year, we no longer believe that the annual growth rate of one percent previously predicted by us is within reach. We now expect private consumption spending in the current year to stagnate. For state consumption expenditure, we expect an increase to the scale of 5.2 percent in real terms this year. For 2021 overall, this would result in an increase in consumption expenditure of 1.6 percent. The data of national accounts for investment in plant and equipment shows an increase of ten percent in the first half of the year compared to the same period last year. There are several indications that investment levels will continue to increase in the second half of the year. Capacity utilisation in some industries stood above the long-term average at the start of the third quarter which is likely to lead to expansion as well as replacement investment and is already reflected by the domestic demand for capital goods which has remained high since the fourth quarter 2020. We therefore stick to our forecast that investment in plant and equipment will increase by seven percent. For construction investment we are also holding on to to our prediction of 0.5 percent growth in real terms. Construction output has continued to rise in the first six months of the year. Capacity utilisation of machinery in this sector is only just under last year’s level. Furthermore, the order backlog for construction is high which will keep demand up. Limitations on growth in construction are more likely to be in the form of shortages in supplies and workers rather than a lack of demand. We still expect investment in other assets (software, research and development) to increase by two percent. Overall, these forecasts would increase gross fixed capital formation by 2.9 percent compared to the previous year. Exports increased by 11.5 percent in the first six months of the year. Trade with EU partner countries and with the US was above average in the second quarter. Business with China lost momentum slightly. As growth is likely to slow down in the second half of the year, we still expect exports of goods and services for 2021 overall to increase by 8.5 percent in real terms. Regarding imports, higher exports will also mean more intermediates. We expect the import of services to grow less because of the
13
Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
restrictions imposed due to the pandemic, so imports will probably only increase by seven percent following price adjustment. All in all, we expect gross domestic product in the current year to increase by three percent in real terms compared to the previous year. This forecast is based on the assumption that by the end of the year a large proportion of the population will have been vaccinated and that economic activity will no longer be impeded by precautionary measures to stem the pandemic. If this is the case, economic output could regain pre-crisis levels by the end of the fourth quarter.
BIP forecast for 2021: Change in real economic output over the previous year in percent Actual figures 2020
BDI 2021
Federal Government 2021
European Commission 2021
GDP, real
- 4.6
3.0
3.5
3.4
Consumption
- 3.2
1.6
-
-
- Private Consumption
- 5.9
0.0
0.8
0.1
- Public Consumption
3.5
5.2
5.2
3.6
- 2.2
2.9
3.5
3.2
-11.2
7.0
7.5
9.0
- Construction
2.5
0.5
1.4
-
- Other
1.0
2.0
3.3
-
Exports
- 9.3
8.5
9.2
10.4
Imports
- 8.6
7.0
7.8
7.9
Net Exports, Economic Output
- 0.8
-1.6
1.1
1.5
Investment - Machinery and Equipment
Sources: Federal Statistical Office, Federal Government (April 2021), European Commission (May 2021), own calculations
14
Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Imprint Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu Author Thomas Hüne T: +49 30 2028-1592 t.huene@bdi.eu Editorial/Graphics Dr. Klaus Günter Deutsch T: +49 30 2028-1591 k.deutsch@bdi.eu Marta Gancarek T: +49 30 2028-1588 m.gancarek@bdi.eu
This Quarterly Report Germany is a translation based on „Quartalsbericht Deutschland III / 2021“ as of 17 September 2021.
15
Recovery losing steam | Pre-crisis levels within reach by yearend 20/09/2021
Basic data for national accounts GDP (price, seasonally and calendar adjusted) Change over previous period in percent 2020
2021
2019
2020
Q1
Q2
Q3
Q4
Q1
Q2
1.9
-3.2
-1.2
-8.0
8.4
-1.6
-3.8
2.8
-Private Consumption
1.6
-5.9
-2.1
-11.5
11.5
-2.7
-5.2
3.2
-Public Consumption
3.0
3.5
0.9
0.8
1.7
0.9
-0.7
1.8
1.8
-2.2
-0.1
-6.9
4.5
2.4
-0.7
0.5
-Machinery and Equipment
1.0
-11.2
-6.7
-14.8
16.7
1.9
-0.4
0.3
-Construction
1.1
2.5
4.0
-3.5
-0.9
2.9
-0.2
0.3
-Other
5.5
1.0
0.6
-3.5
2.3
1.8
-2.6
1.3
Domestic Demand
1.8
-4.0
-0.8
-8.1
5.6
-0.3
-1.1
2.4
Exports
1.1
-9.3
-3.4
-20.1
17.5
4.6
1.4
0.5
Imports
2.9
-8.6
-1.5
-16.9
9.3
2.7
4.2
2.1
Total
1.1
-4.6
-1.8
.-10.0
9.0
0.7
-2.0
1.6
Consumption
Investment
Contribution to growth (in percentage points) Consumption
1.4
-2.3
-0.9
-5 8
6.2
-1.2
-2.7
2.0
-Private Consumption
0.8
-3.0
-1.1
-6 0
5.8
-1.4
-2.6
1.6
-Public Consumption
0.6
0.7
0.2
02
0.4
0.2
-0.2
0.4
0.5
-0.8
0.0
-1 5
-1.0
0.5
-0.2
0.1
-Machinery and Equipment
0.0
-0.9
-0.5
-1 0
1.0
0.1
0.0
0.0
-Construction
0.4
0.2
0.4
-0 4
-0.1
0.3
0.0
0.0
-Other
0.1
0.0
0.0
-0 1
0.1
0.1
-0.1
0.1
Change in stocks
-0.7
-0.7
0.1
-0 4
-1.8
0.5
1.9
0.1
Domestic Demand
1.7
-3.7
-0.8
-7 7
5.5
-0.2
-1.0
2.2
-0.7
-0.8
-1.0
-2 3
3.6
1.0
-1.0
-0.6
Investment
Net exports
Source: Destatis
16
