German gross domestic product fell by 1.8% in Q1
Article continues below
Topics: GERMAN
After the German economy had somewhat recovered in the second half of 2020 (+8.7% in the third quarter and +0.5% in the fourth quarter), the coronavirus crisis caused another decline in economic performance at the beginning of 2021.
The Federal Statistical Office (Destatis) reports that the decrease was slightly larger than reported in the first release of 30 April 2021. Compared with the fourth quarter of 2019, the quarter before the corona crisis began, GDP was 5.0% lower.
The continuing, and in part intensified, restrictions imposed to contain the coronavirus pandemic had a particularly marked impact on household final consumption expenditure at the beginning of the year.
In the first quarter of 2021, household final consumption expenditure fell by 5.4% on the fourth quarter of 2020 after adjustment for price, seasonal and calendar variations. Government final consumption expenditure was slightly higher than in the previous quarter (+0.2%).
Positive contributions came especially from gross fixed capital formation in construction in the first quarter of 2021 as it rose 1.1% on the fourth quarter of 2020 after price, seasonal and calendar adjustment. Seasonally adjusted gross fixed capital formation in machinery and equipment was slightly down on the previous quarter (-0.2%).
Foreign trade increased at the beginning of the year. However, the increase in imports of goods and services in the first quarter of 2021 (+3.8%, price-, seasonally and calendar-adjusted) was markedly larger than the increase in exports (+1.8%).
In the first quarter of 2021, the price-, seasonally and calendar-adjusted gross value added decreased by 0.8% on the fourth quarter of 2020.
Diverging trends were shown for the individual economic sectors.
Gross value added in manufacturing was slightly up on the fourth quarter of 2020 (+0.4%), whereas gross value added in trade, transport, accommodation and food services was down (-3.2%). The decrease in construction was even larger (-4.9%), one of the reasons being the unusually cold weather at the beginning of the year.
GDP in the first quarter of 2021 was down a price-adjusted 3.4% compared with the first quarter of 2020. After price and calendar adjustment, the decrease was slightly smaller (-3.1%) as there was one working day less than a year earlier.
Domestic demand continued to be far lower than a year earlier. This applies especially to household final consumption expenditure, which was down a price-adjusted 9.1% on the first quarter of 2020.
Gross fixed capital formation did not contribute to year-on-year growth either.
Fixed capital formation in machinery and equipment decreased by 0.7% and in construction by 1.6% on a year earlier. Only government final consumption expenditure (+2.5%) and foreign demand had an upward effect when compared with a year earlier.
Foreign trade rose considerably on the first quarter of 2020, with exports of goods increasing slightly more than imports of goods.
At the same time, foreign trade in services saw two-digit decreases, as was the case in the previous three quarters. On the whole, exports of goods and services fell by 0.6% (price-adjusted) in the first quarter of 2021 on the first quarter of 2020. Total imports declined by 3.0% in the same period.
On the production side of the GDP, price-adjusted gross value added was lower in almost all economic sectors in the first quarter of 2021 compared with a year earlier. The largest decreases (-13.9%) were recorded for other services, which include entertainment and recreation.
In trade, transport, accommodation and food services, gross value added fell sharply, too (-8.2%).
Especially accommodation and food services recorded an even larger decrease. Following the two-digit slump last summer, the economic situation in manufacturing continued to improve; nevertheless, gross value added in the first quarter of 2021 was still by 1.2% below the level of the first quarter of 2020. Information and communication is the only sector that saw noticeable economic growth on a year earlier (+0.7%).
Total gross value added was down 3.5%.
The economic performance in the first quarter of 2021 was achieved by roughly 44.4 million persons in employment whose place of employment was in Germany. This was a decrease of 707,000, or 1.6%, on a year earlier (see press release 230/21 of 18 May 2021).
It must be noted, however, that short-time work does not affect the employment figures because short-time workers still count as persons in employment.
However, short-time work had a substantial effect on the average number of hours worked per person in employment. The latter decreased by 4.0% in the first quarter of 2021 compared with the first quarter of 2020, according to first provisional calculations of the Institute for Employment Research of the Federal Employment Agency. The labour volume of the overall economy, which is the total number of hours worked by all persons in employment, went down even more (-5.5%) over the same period.
Overall labour productivity (price-adjusted GDP per hour worked by persons in employment) rose by 2.3% on the same quarter of the previous year, according to provisional calculations. However, labour productivity per person in employment was down 1.9% compared with the first quarter of 2020.
At current prices, both the GDP and the gross national income were down 1.1% in the first quarter of 2021 compared with a year earlier.
Net national income at factor costs was up 0.9% on the first quarter of 2020.
While the compensation of employees was slightly down (-0.4%), property and entrepreneurial income was up 4.0% according to first provisional calculations. Gross wages and salaries per employee recorded a slight increase on average (+0.2%), while average net salaries rose 1.0% because of decreasing social contributions paid by employees.
The disposable income of households was by 1.1% higher in the first quarter of 2021 than a year earlier.
Household final consumption expenditure at current prices, however, showed a decrease of 7.3%. As in the previous three quarters, the relatively stable incomes, on the one hand, and consumer reticence, on the other, resulted in a substantial rise in household saving during the corona crisis. According to provisional calculations, the savings ratio was 23.2% in the first quarter of 2021.
Trends were diverging within Europe. In the first quarter of 2021, the price-, seasonally and calendar-adjusted GDP declined for example in Spain (-0.5%) and Italy (-0.4%) on the fourth quarter of 2020, while a slight increase was seen in France (+0.4%).
According to provisional calculations, the Statistical Office of the European Union (Eurostat) reported a GDP decline of 0.4% on the previous quarter for the European Union (EU) as a whole, which was markedly smaller than for Germany (-1.8%). The United States recorded a substantial increase in their gross domestic product (+1.6%, converted figure) at the beginning of the year, compared with the fourth quarter of 2020.
When compared with a year earlier, too, an increase in GDP (+0.4%, converted figure) was reported for the United States.
The French economy recorded a considerable increase on the first quarter of 2020 (+1.5%), whereas most EU Member States reported marked decreases.
Spain recorded the largest year-on-year decline (-4.3%) of all the Member States which have data available as yet for the first quarter of 2021. In Italy, the decline (-1.4%) was smaller than in Germany (-3.1%). For the whole EU, Eurostat released a preliminary result of -1.7% on the same quarter of the previous year. ■