German GDP Posts Historic Rebound in 3Q -- Update

10/30/2020 | 05:51am

--Germany's third-quarter GDP grew 8.2% on quarter and fell 4.3% on year

--GDP data for 2Q was revised down to a 9.8% on quarter contraction

--German government upwardly revises 2020 GDP forecasts

By Maria Martinez

The German economy posted a record expansion in the third quarter in output, the German statistics office Destatis said Friday.

The country's gross domestic product grew 8.2% compared with the previous quarter, according to Destatis. Economists polled by The Wall Street Journal forecast a 6.8% expansion.

Growth was based on higher household consumption, an increase in investment in machinery and equipment, and a sharp increase in exports, Destatis said.

The agency also revised data for the second quarter. After the revision, Germany's GDP contracted 9.8% in the period compared with a first estimate of a 9.7% decline.

GDP fell 4.3% on year in the third quarter on a calendar and price-adjusted basis, Destatis said. Economists polled by the Journal had forecast a 5.7% contraction.

After the announcement of a new lockdown to contain the coronavirus pandemic, economists fear that the strong surge in activity in the third quarter could be followed by another dip in the final months of the year.

"This 'lockdown 2.0' still tries to spare industry but, given that many parts of the service sector will now be closed for at least four weeks, there is a risk that despite new government support of some 10 billion euros ($11.67 billion), unemployment and insolvencies will increase," Carsten Brzeski, global head of macro at ING, said.

Germany's federal and state governments agreed Wednesday to a one-month shutdown of restaurants, bars, fitness studios, concert halls and theaters, starting Monday. Hotels are barred from hosting tourists until the end of the month and public gatherings will be limited to 10 people from two households.

If the restrictions work to bring the pandemic under control and can be eased again after one month, the direct hit to Germany's fourth-quarter GDP could be around 0.6% to 0.7%, according to Berenberg's forecasts. Including a modest negative confidence effect on the propensity of households to consume and companies to invest, the hit to fourth-quarter GDP could be 1.0% to 1.2%, Berenberg said.

However, the federal government has upwardly revised its economic forecasts for 2020 to a 5.5% contraction from a 5.8% decline forecast at the beginning of September.

The government keeps its 4.4% growth forecast for 2021 and the pre-crisis level isn't expected to be reached again until 2022, Economy Minister Peter Altmaier said.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

10-30-20 0649ET

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