German economy grew at record pace in 3rd quarter but fears mount

Europe’s largest economy grew by 8.5 percent in June-September period, but rising COVID infections cloud outlook.

Germany’s gross domestic product (GDP) grew by a record 8.5 percent in the third quarter as Europe’s largest economy partly recovered from an unprecedented plunge caused by the first wave of the COVID-19 pandemic in the northern spring, the statistics office said on Tuesday.

The stronger-than-expected rebound was mainly driven by higher household spending and soaring exports, the office said.

“This enabled the German economy to make up for a large part of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020,” it added.

The reading marked an upward revision to an earlier flash estimate of 8.2 percent growth and followed a 9.8 percent plunge in the second quarter.

The outlook is clouded by a second wave of coronavirus infections and a partial lockdown to slow the spread of the disease. Restaurants, bars, hotels and entertainment venues have been closed since November 2, but shops and schools remain open.

Chancellor Angela Merkel and regional state premiers are planning to extend the “lockdown-light” on Wednesday until December 20, according to a draft prepared for their meeting.

A contraction in the service sector is expected to weigh heavily on the GDP in the fourth quarter, while lockdown measures in other countries are likely to hit export-oriented manufacturers as well.

DIW economist Claus Michelsen said a decline in economic output was therefore on the cards, with initial estimates indicating a GDP drop of approximately 1 percent in the final quarter.

“Germany and many important trading partners are likely to slide back into recession,” Michelsen said.