Quarterly Report Germany II/2021

QII-2021 QUARTERLY REPORT GERMANY

Recovery falters at start of year Strong growth expected in second half of the year

▪

Real economic output dropped 1.8 percent in the first quarter 2021 compared to the previous quarter. With lockdown measures gradually easing, the German economy should pick up in the second quarter.

▪

Consumption expenditure of private households was down more than nine percent in the first quarter. A bigger slump of over thirteen percent was only seen in the second quarter last year.

▪

Foreign trade slowly gathered pace at the start of the year. Trade with China and EU partner countries is on a robust upward path.

▪

Industry has hardly been affected by the third wave of the pandemic. Incoming orders for manufacturing are positive year on year for the second consecutive quarter. Capacity utilisation rates in industry are already higher than before the crisis.

Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Content German economy ................................................................................................................................ 3 Third wave of pandemic stalls economic recovery at start of the year ................................................. 3 Foreign trade across countries .............................................................................................................. 4 Labour market recovers further from COVID crisis ............................................................................... 6 Incoming orders for industry still pointing up ......................................................................................... 7 Industrial production stalls in April ......................................................................................................... 8 Industrial capacity utilisation rates higher than before the crisis in many sectors .............................. 10 Sales not yet back to pre-crisis levels ................................................................................................. 10 Business climate: Sentiment could hardly be better ........................................................................... 11 Outlook ............................................................................................................................................... 12 Imprint ................................................................................................................................................ 14 Basic data for national accounts ..................................................................................................... 15

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

German economy Third wave of pandemic stalls economic recovery at start of the year The third wave of coronavirus has dampened the economic recovery at the start of the current year. In the first quarter 2021, gross domestic product (GDP) dropped by 1.8 percent in real terms compared to the fourth quarter 2020 following seasonal and calendar adjustment, putting a stop to the growth recorded by the German economy in the second half of last year.

Economic output was also down year on year. Real GDP decreased 3.1 percent compared to the first quarter 2020 following calendar adjustment. Economic output was five percent lower than in the fourth quarter 2019, which was the quarter before the pandemic broke out. Looking at other European countries, Spain suffered an even more pronounced drop in GDP of 4.3 percent year on year. In Italy, GDP declined 1.4 percent, slightly less than the European average of minus 1.7 percent. France has now recorded its second consecutive drop in GDP and is therefore in recession.

Growth in real GDP in percent 10 8 6 4

2.6 1.3

2

0.6

0 -2 -4 -6

-4.8

-8 -10 -12 I

II

III

IV

I

2017

II

III

IV

I

II

2018

III

2019

IV

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

On the output side of GDP, Germany’s economic output in the first quarter of the year was generated by a workforce of around 44.4 million. That is 707,000 people or 1.6 percent less than one year ago.

In terms of hours, the labour volume dropped by 4.5 percent year on year and 5.2 percent compared to the fourth quarter 2019. In the first quarter 2021, gross value added was lower than in the first quarter 2020 across almost all economic sectors. The steepest drops were recorded by other service providers (down 13.9 percent) and retail, transport and hospitality (down 8.2 percent). Gross value added by corporate service providers was down 5.7 percent, around twice as much as public service providers

3

Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

(down three percent). Unlike at the start of the pandemic, gross value added in manufacturing only fell a slight 1.2 percent. The only sectors that managed to increase economic output somewhat compared to last year were information and communication services and real estate. Overall, in the first quarter 2021, gross value added was down 3.5 percent.

On the expenditure side of GDP, consumption expenditure was the main factor curbing growth. In the first quarter 2021, consumption expenditure of private households was 9.1 percent down year on year. A bigger drop of minus 13.3 percent was only seen in the second quarter 2020. Consumers reduced their spending particularly on hotels and restaurants, which was down 56.2 percent or more than half. Spending on clothing and shoes also nosedived (down 23.7 percent), as it did on leisure, entertainment and culture (down 17.6 percent) and transport and communication services (down 10.8 percent). While spending on home furnishings and household goods rose during the pandemic last year, it dropped a substantial 7.1 percent at the beginning of this year. Expenditure increased slightly on food, beverages and tobacco as well as for housing, water, electricity and heating. State consumption expenditure bucked the broad negative trend, rising 2.5 percent. As a result, consumption expenditure only slowed economic growth by minus 4.1 percentage points.

In the first quarter 2021, gross fixed capital formation dropped by 1.1 percent in real terms after rising slightly in the last quarter of 2020. Construction investment for both residential and non-residential buildings was down by 1.6 percent. Investment in other assets (patents and licences) dipped 0.7 percent. Investment in plant and equipment continued its negative trend, going down for the sixth consecutive quarter, this time by a moderate 0.7 percent. Overall, investment shaved 0.2 percentage points off GDP growth.

The export of goods and services only dropped a marginal 0.6 percent in the first quarter following price adjustment. While the value of goods exported increased by 2.6 percent year on year, exported services were down by a hefty 14.6 percent. Imports followed a similar pattern, dropping by three percent overall. While imported goods increased by two percent, imported services slumped by somewhat over one fifth in the same period. As imports decreased more than exports, net exports ultimately contributed 0.9 percentage points to GDP growth.

Foreign trade across countries In the first quarter 2021, the export of German goods increased by a total of 8.09 billion euros or 2.5 percent compared to the same period last year (country-specific seasonally adjusted data is not available). Exports to China buoyed the recovery considerably, going up by 4.8 billion euros or 22.3 percent, and thus more than compensating for last year’s decline. Exports also increased by more than the average rate to the Netherlands (up 1.97 billion euros or 8.8 percent), to Italy (up 1.75 billion euros or 10.7 percent), and to Poland (up 1.75 billion euros or 10.7 percent). Exports to the United States only went up 1.1 percent, which is less than average. The steepest drop by far was recorded in exports to Great Britain, which slumped by 3.4 billion euros or 17.4 percent. Exports to Saudi Arabia and the United Arabic Emirates were also down by almost one fifth.

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

German exports and imports in Q1 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 %

China

21 516

+ 4 800

+

22.3

China

25 818

+ 6 340

+ 24.6

Netherlands

22 332

+ 1 967

+

8.8

Poland

14 485

+ 2 151

+ 14.9

Italy

16 416

+ 1 749

+

10.7

Italy

14 095

+ 1 380

+

Poland

17 094

+ 1 617

+

9.5

Czech Republic

11 253

+ 1 171

+ 10.4

Austria

15 994

+

761

+

4.8

Slovakia

3 708

+

868

+ 23.4

Belgium

11 552

+

588

+

5.1

Austria

10 518

+

803

+

0

+

416

+

Norway

2 636

+

711

+ 27.0

3 595

+

334

+

9.3

South Africa

2 393

+

642

+ 26.8

Czech Republic

10 962

+

331

+

3.0

Hungary

7 041

+

500

+

7.1

USA

28 772

+

308

+

1.1

Spain

8 263

+

472

+

5.7

Japan

4 884

-

316

-

6.4

Switzerland

12 466

-

609

-

4.9

Saudi Arabia

1 699

-

327

-

19.3

Singapore

1 472

-

634

- 43.1

U.A. Emirates

1 723

-

349

-

20.3

France

16 069

-

729

-

Canada

2 873

-

510

-

17.7

Japan

6 068

-

731

- 12.1

South Korea

5 217

-

574

-

11.0

USA

18 573

- 2 020

- 10.9

Great Britain

19 677

- 3 430

-

17.4

Great Britain

10 428

- 2 885

- 27.7

324 725

+ 8 093

+

2.5

273 507

+ 7 124

+

BVI* Slovakia

Total

Total

9.8

7.6

4.5

2.6

*British Virgin Islands Sources: Federal Statistical Office, own calculations

German imports increased by a total of 7.12 billion euros or 2.6 percent in the first quarter of 2021 compared to the same period last year. The strongest growth in nominal terms was in imports from China (up 6.34 billion euros or 24.6 percent). With a plus of 4.69 billion euros or 12.9 percent, imports from the Visegrád states also rose considerably. Imports from the euro member states Italy (up 9.8 percent), Austria (up 7.6 percent) and Spain (up 5.7 percent) also grew at more than the average rate, as did those from the non-EU countries Norway and South Africa. Imports from Great Britain, on the other hand, were down by more than one quarter, tumbling by 27.7 percent or 2.88 billion euros.

Imports from the United States dropped by 2.02 billion euros which is slightly more than one tenth.

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Labour market recovers further from COVID crisis The advent of spring has brought the first signs of recovery to the labour market. According to preliminary data from the German Federal Statistical Office, the number of people in employment increased by 10,000 in April this year following seasonal adjustment, after rising 18,000 in March. Compared to April 2020, however, the number of people in employment was down by 231,000 or 0.5 percent to 44.5 million.

The latest figures on employment subject to social security contributions are also trending positively. According to projections of the German Federal Employment Agency for March 2021 (latest available figure), the number of people in such employment was 33.62 million, which is 38,000 more than in February, but 15,700 less than one year ago. The number of workers in full-time employment subject to social security contributions was 73,000 or 0.3 percent lower year on year while the number of workers in part-time employment subject to social security contributions increased by 57,000 or 0.6 percent.

German labour market* 34

4 Unemployed persons (right axis) 3

32 2 Employed personscovered 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 employment figures for other forms of employment decreased much more than for jobs subject to social security contributions. The number of self-employed including contributing family members dropped by 179,000 or 4.4 percent to 3.90 million in the first quarter 2021. The number of people exclusively in marginal employment also declined, going down by 325,000 or 7.5 percent to 4.02 million in March, according to preliminary figures from the Federal Employment Agency. The number of unemployed people decreased by 125,800 or 4.5 percent to 2.69 million in May 2021 (year on year). Following seasonal adjustment, the number of unemployed people dropped by 15,000 following an increase of 8,000 in April.

In May 2021, the unemployment rate was at six percent as calculated by the Federal Employment Agency, or 4.4 percent according to the ILO definition. In March 2021, a total of 2.61 million employees were in short-time work programmes. According to preliminary figures, 7.7 percent of employees liable

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

to social security contributions were therefore in short-time work in March. The average lost worktime in March was 56 percent, which means that in arithmetic terms, the use of short-time work programmes secured the jobs of 1.46 million employees.

Incoming orders for industry still pointing up The outbreak of the COVID pandemic at the beginning of last year first impacted order books in March 2020, before leading to a veritable collapse in April. A corresponding rebound effect took place in March and April this year. While incoming orders for industry dropped by 0.2 percent in April 2021 compared to the previous month and following seasonal and calendar adjustment, they were up by 1.5 percent on the previous month if large orders are left out of the equation. The preliminary figures for March were also heavily upwardly revised. Compared to the trough in April 2020, the latest figures show incoming orders up by 78.9 percent year on year. This has more than compensated for the slump in orders last year, as one year ago, incoming orders for industry were “only” down by 38.4 percent year on year.

New orders, manufacturing 115

35

32.1

110

25

105 15

100

7.5 2.8

95

2.9

5

90 -5

85 80

-15

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

In the first quarter 2021, incoming orders were up by 2.8 percent on the previous quarter following calendar and seasonal adjustment. Orders from abroad went up 3.3 percent, slightly more than domestic orders, which only increased by 2.1 percent. Compared to last year, demand rose 11.7 percent, with domestic and foreign orders increasing on a similar scale.

Among the main groups of industrial goods, incoming orders for intermediates were up by 4.9 percent in the first quarter 2021 compared to the previous quarter. Year on year, orders were up by a solid twelve percent. Domestic demand (up 12.9 percent) rose considerably more than orders from abroad (up 11,2 percent).

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Demand for capital goods only increased slightly in the first quarter 2021, going up 1.8 percent compared to the fourth quarter 2020. Year on year, orders were up by a notable 13 percent. Orders from domestic companies increased by 11.6 percent compared to last year and were thus slightly less dynamic than orders from abroad, which rose by 13.8 percent.

Consumer goods producers only received a marginal 0.3 percent more orders in the first quarter 2021 than in the previous quarter. Year on year, orders were only up by 1.7 percent. While demand from within Germany dropped by 3.23 percent, orders from abroad were up by five percent compared to the same period last year.

The recent steep rise in incoming orders has filled order books substantially. According to figures from the ifo Institute, orders in hand in manufacturing reached 3.5 production months at the start of the second quarter 2021, thus outperforming the record so far from the first half of 2018. The backlog of orders for producers of intermediates increased by 0.6 production months to 3.1 production months.

Capital goods producers have orders in hand amounting to 4.4 production months, while orders among consumer goods producers remain at two months.

According to figures from the Federal Statistical Office, the backlog of orders in manufacturing increased in March 2021 for the tenth month in a row. Domestic orders in hand increased by 1.9 percent, while orders in hand from abroad increased by 1.2 percent. This means that more than one year after the start of the pandemic, the backlog of orders is 8.3 percent higher following seasonal and calendar adjustment than before restrictions were introduced in February 2020.

Industrial production stalls in April In April, production in manufacturing dipped 0.6 percent compared to the previous month following seasonal and calendar adjustment and according to preliminary figures from the Federal Statistical

Production, manufacturing 110

20

13.9

15 10

6.4

100

5 0 -0.2 -0.8

90

-5 -10 -15

80

-20 -25

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

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Office. Compared to the same period last year, figures were up 34.2 percent on account of the base effect, as in April 2020 the economic slump induced by the pandemic bottomed out. Energy production increased by six percent in April 2021 compared to March and by 19.5 percent year on year. Construction activity was down 4.3 percent on the previous month. As only minor pandemic related restrictions were imposed on construction last year, production in the sector went up by just 1.3 percent year on year. Output in the production sector dropped by one percent in April 2021.

Year on year, however, it was up by a hefty 26.4 percent. The figures for Marc h were revised slightly, with the increase in turnover corrected from 2.5 percent to 2.2 percent.

In the first quarter 2021, industrial production was 0.2 percent lower than in the previous quarter following seasonal and calendar adjustment. Year on year, production was down 1.5 percent following a drop of three percent in the fourth quarter 2020. This means that in the year on year comparison, production has now been pointing down for eleven quarters.

Production development in the manufacturing industry year on year change in percent 2019 2020 2020 2021 year Q3 Q4 Q1 original value calendar adjusted

compared to previous period in percent 2020 2021 Q3 Q4 Q1 Feb Mar Apr seasonally and calendar adjusted

Production

-3.3

- 7.3

- 8.4

- 1.7

-1.9

10.6

6.0

-1.0

-1.9

2.2

- 1.0

Industry

-4.2

- 9.6

-10.4

- 3.0

-1.5

13.9

6.4

-0.2

-2.0

0.7

- 0.6

Intermediate goods

-3.6

- 6.1

- 7.5

1.1

2.4

10.1

7.8

2.2

-0.9

0.7

- 0.2

Capital goods

-4.5

-14.6

-15.3

- 6.0

-3.7

21.6

7.7

-2.2

-3.6

0.1

- 0.1

Consumer goods

-4.7

- 3.7

- 3.6

- 3.4

-4.4

5.4

0.5

-0.9

0.2

2.7

- 3.3

Energy

-7.2

- 7.2

- 2.9

- 2.7

-2.1

8.0

3.0

-1.6

-2.8

0.5

6.0

Construction industry

3.3

3.3

- 0.5

5.0

-4.7

- 1.5

5.3

-4.3

-1.4

9.8

- 4.3

Construction industry proper

5.9

5.9

2.8

2.9

-3.0

- 0.4

0.4

-0.3

-2.3

16.6

-11.6

Finishing industry

1.0

0.0

- 3.7

6.6

-6.3

- 2.7

10.1

-7.8

-0.4

3.5

3.1

Sources: Federal Statistical Office, own calculations

In April, industrial production dipped slightly but the general trend is still upward. The order books for industry are full. Soft indicators including the business climate and the purchasing managers’ index signalise an increase in production in the coming months.

As production took a major slide in March last year, a rebound was clearly on the cards, but its scale remained to be seen. The increase in production, at more than five percent according to the latest figures, was substantial especially considering that the COVID restrictions were only imposed in the second half of March last year. The quarterly figures nonetheless reveal that despite a good level of

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

orders and positive sentiment, not everything in industry is running smoothly. A closer look at the individual figures may provide some explanation. One factor is the automotive industry and, to some extent, other transport equipment, where supply shortages are restraining production. In clothing and among producers of glass and ceramics, meanwhile, it is clogged up sales markets that are keeping production down. With vehicle production showing clear signs of recovery in March, industrial production should be much stronger in the second quarter.

Industrial capacity utilisation rates higher than before the crisis in many sectors The ramp up of activities came hand in hand with a considerably higher capacity utilisation rate. In the second quarter 2021, capacity utilisation in manufacturing increased by 4.2 percentage points to 86.2 percent. For the first time in two years, capacity utilisation is now higher than the average for the past ten years. The capacity utilisation rate in manufacturing excluding food increased even more, going up 4.4 percentage points in the same period, which is 2.2 percentage points more than the average capacity utilisation rate for the last ten years. Among the individual industries, the utilisation rates varied. In vehicle production, capacity utilisation of machinery is currently 8.1 percentage points higher than before the pandemic. In the chemical industry and among producers of metal products, capacity utilisation is seven percentage points higher than before the pandemic. Among machinery manufacturers and producers of electrical and electronic goods, utilisation is also higher than before the crisis. Capacity utilisation is still below pre-crisis levels among the producers of food, beverages and tobacco (by 2.6 percentage points), in the furniture industry (by 2.1 percentage points) and in pharmaceuticals (by 1.4 percentage points). In textiles, capacity utilisation is only narrowly below precrisis levels.

Sales not yet back to pre-crisis levels One year on from the start of the COVID pandemic, sales are presenting a mixed picture. Sales in manufacturing increased by 1.2 percent in the first three months of the current year compared to the Manufacturing revenue* (first quarter 2021)

Wood processing

9.7

Electronic industry

7.8

Metal production and metalworking sector

6.4

Motor vehicle production

5.5

Pharmaceuticals

5.1

Chemical industry

3.2

Manufacturing

1.2

Glass, ceramics, stone, industrial minerals

1.0

Machinery manufacturing

1.4

Paper and pape

-2.5

Other transport equipment production

-5.5

Food, beverages, tobacco

-7.2

Textiles, fasion, leather

-7.3

*change in percent, year on year Source: Federal Statistical Office

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

same period last year. However, compared to the fourth quarter 2019, the last quarter before the outbreak of the pandemic, sales were down by 3.4 percent. While domestic sales are lower than one year previously, foreign sales increased for the first time in seven quarters.

Among the individual industries, sales in the woodworking industry increased the most, rising by 9.7 percent. Sales of electric and electronic goods increased by 7.8 percent, making it the second quarter with higher sales than before the pandemic. Metal production and metal processing companies also increased their sales on a similar scale, rising 6.4 percent. In vehicle production sales were up by a considerable 5.5 percent, but still lower than the pre-crisis level of over six percent. Sales in the chemical industry increased by 3.2 percent in the first quarter. At somewhat more than 39 billion euros, this is the industry’s best quarterly performance ever. Machinery production and the paper industry only saw a moderate drop in sales of 1.4 percent and 2.5 percent respectively, but for both industries this is the eighth consecutive decrease. Other transport equipment (minus 5.5. percent) and the textiles industry (minus 7.3 percent) both recorded sharp reductions in sales.

Business climate: Sentiment could hardly be better In May, the ifo business climate index for Germany hit a two-year high. For the fourth time in a row, companies surveyed were happier with their current business situation than in the previous

ifo Business-Cycle Clock German manufacturing*

30

Jan 2011

Upswing

Boom

Business expectations for the next six month

20 10

May 2021

Jan 2021

Jan 2010

0 Jan 2019

Jan 2020

-10 -20 -30 -40

Jan 2009

-50 Downswing

Reccession -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

month. At the same time, business prospects for the upcoming six months were also viewed much more optimistically. Among the individual sectors, the sentiment indicator for service providers recorded its third strongest rise. Service providers rated both current business and business

11

Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

prospects as markedly improved. Hospitality and tourism companies are beginning to see light at the end of the tunnel. The index for wholesale and retail also rose substantially. Wholesalers and retailers rated their current business as improved and view their prospects with cautious optimism, which marks a turnaround. While wholesalers are benefiting from buoyant industrial activity, retailers are building their hopes on the further easing of restrictions. In mainstream construction, the business climate index went up once again, following a downturn in April. Both current business and business prospects brightened up. While most companies surveyed were positive about their current situation, the majority were pessimistic about the next six months. A shortage of materials is also curbing sentiment. The business climate index for manufacturing increased for the fourth consecutive time. Industrial companies rated their current situation as improved compared to the previous month for the twelfth time in a row. Business prospects for the upcoming six months have clouded over somewhat. Export expectations dipped slightly for the first time since November 2020 but are still rated as positive by most of companies surveyed.

Outlook The German economy suffered a significant setback in the first quarter of this year due to the measures imposed to contain the pandemic that remained in force well into spring. The effects of this are likely to affect growth also in the second quarter as restrictions were only eased towards the end of this period. Unlike when the pandemic first broke out, industrial activity has hardly been affected since the beginning of the year. Gross value added in contact-intensive areas of the service sector, such as retail and hospitality, however, dropped considerably. This, in turn, has curbed consumer demand in the first half of the year and also sharply increased the savings rate.

Foreign trade also performed below our expectations at the beginning of the year. While trade with China saw high growth rates, these are based on the low level of activity at the beginning of last year due to the outbreak of the pandemic. Trade with EU partner countries increased at above average rates, with activity with the Visegrád countries recording the highest rates of growth. Trade with the United States and the United Kingdom, on the other hand, has not yet regained its stride. We do expect trade with the United States, at least, to pick up noticeably in the further course of the year when the approved economic stimulus packages take effect. An increase in the import of intermediates is anticipated. The surge in imports will be further amplified by the fact that inventories were emptied during the pandemic and now need to be refilled. The summer holiday season will lead to a steep increase in foreign travel and more imported services.

The domestic economy should slowly regain its footing. Employment numbers on the labour market are up. At the same time, companies are steadily making less use of short-time work programmes. As new cases of COVID infections continue to decrease, the next few weeks should see a further easing of restrictions in retail and hospitality. After a short time lag, private consumption should then start to gain momentum. How much of the money saved will now be spent on consumption is difficult to predict.

Some of the savings may well be used to pay off loans or to make investments. According to consumer research organization GfK, sentiment among consumers in May was considerably brighter than in May last year. The propensity to make purchases and income prospects were considerably higher year on year. The consumer expectations indicator even climbed to its highest level in three years.

Investment activity is likely to pick up again in 2021. Capacity utilisation in many manufacturing industries was already well over pre-crisis levels at the beginning of the second quarter, which will lead to both replacement and expansion investment a little further down the line. The construction industry

12

Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

recorded its highest ever orders in hand in March, which would, arithmetically, keep companies busy until November. However, the growing scarcity of materials is a limiting factor that will increasingly curb the growth potential of construction investment. Investment in other assets (software, research and development) dropped slightly at the start of the year but should recover in the further course of the year.

BIP forecast for 2021: Change in real economic output over the previous year in percent Actual figures

Joint economic forecast

Federal Government

2020

2021

2021

European Commission 2021

GDP, real

- 4.8

3.7

3.5

3.4

Consumption

- 3.3

0.8

-

-

- Private Consumption

- 6.0

0.2

0.8

0.1

- Public Consumption

3.7

2.0

5,2

3.6

- 2.7

2.9

3.5

3.2

-11.6

8.7

7.5

9.0

2.3

-0.4

1.4

-

- 1.1

3.2

3.3

-

Exports

- 9.4

11.7

9.2

10.4

Imports

- 8.4

7.7

7.8

7.9

Net Exports, Economic Output

- 0.9

2.2

1.1

1.5

Investment - Machinery and Equipment - Construction - Other

Sources: Federal Statistical Office, Joint economic forecast spring (April 2021), Federal Government (April 2021), European Commission (May 2021)

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Imprint Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu Authors Dr. Klaus Günter Deutsch T: +49 30 2028-1591 k.deutsch@bdi.eu Thomas Hüne T: +49 30 2028-1592 t.huene@bdi.eu Editorial/Graphics Marta Gancarek T: +49 30 2028-1588 m.gancarek@bdi.eu

This Quarterly Report Germany is a translation based on „Quartalsbericht Deutschland II / 2021“ as of 08 June 2021.

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Recovery falters at start of year | Strong growth expected in second half of the year 18/06/2021

Basic data for national accounts GDP (price, seasonally and calendar adjusted) Change over previous period in percent 2020 2019

2020

Q1

1.9

-3.3

-1.3

-Private Consumption

1.6

-6.0

-Public Consumption

2.7

Q3

Q4

Q1

-7.8

8.0

-1.5

-3.6

-2.2

-11.5

11.2

-2.3

-5.4

3.7

1.1

1.3

1.0

0.1

0.2

2.5

-2.7

-0.4

-6.7

3.7

2.5

0.3

-Machinery and Equipment

0.5

-11.6

-6.8

-15.1

15.9

1.9

-0.2

-Construction

3.8

2.3

4.3

-4.3

- 1.3

3.7

1.1

-Other

2.7

-1.1

-2.5

0.2

0.9

0.1

-1.6

Domestic Demand

1.2

-4.1

-1.0

-7.6

5.1

-0.2

-1.3

Exports

1.0

-9.4

-3.3

-20.4

17.9

4.4

1.8

Imports

2.6

-8.4

-1.1

-16.9

9.2

3.3

3.8

Total

0.6

-4.8

-2.0

-9.7

8.7

0.5

-1.8

Consumption

Investment

Q2

2021

Contribution to growth (in percentage points) Consumption

1.4

-2.5

-0.9

-5.7

6.0

-1.2

-2.7

-Private Consumption

0.8

-3.2

-1.2

-6.0

5.8

-1.2

-2.7

-Public Consumption

0.5

0.7

0.2

0.3

0.2

0.0

0.0

0.5

-0.8

-0.1

-1.5

0.9

0.5

0.1

-Machinery and Equipment

0.0

-0.9

-0.5

-1.0

1.0

0.1

0.0

-Construction

0.4

0.2

0.5

-0.5

-0.2

0.2

0.4

-Other

0.1

0.0

-0.1

0.0

0.0

0.0

-0.1

Change in stocks

-0.7

-0.7

0.1

-0.1

-1.9

0.5

1.4

Domestic Demand

1.2

-3.9

-0.9

-7.3

4.9

-0.2

-1.2

-0.6

-1.1

-1.1

-2.4

3.8

0.7

-0.6

Investment

Net exports

Source: Destatis

15