Germany: Economy rebounds strongly, but remains below pre-pandemic level
The Euro area’s largest economy grew a strong 8.2% quarter-on-quarter on a price-, seasonally- and calendar-adjusted basis in the third quarter. The print contrasted the prior quarter’s 9.8% drop and reflected the reopening of the economy in the wake of the first Covid-19 wave. However, compared to the same period a year prior, activity was still down 4.1% (Q2: -11.3% year-on-year).
While a detailed quarterly breakdown is set to be released on 24 November, preliminary data points to strengthening domestic and foreign demand. Household consumption, capital outlays and a sharp rise in exports should have driven the result. This came on the back of the easing of restrictive measures that were put in place to curb the spread of the coronavirus.
In the final quarter of the year, economic momentum has likely softened amid a new surge in Covid-19 cases domestically and globally, with Europe being hit particularly hard. Although the economy is expected to recover notably next year and optimism over a vaccine has brightened the outlook somewhat, a possible prolonged viral outbreak is still a key downside risk. Meanwhile, lingering uncertainty regarding the future trade relationship between the European Union and the United Kingdom presents an additional downside risk.