German economy drags itself slowly out of pandemic in third quarter

The German economy continued on its upward path in the third quarter, posting quarter-on-quarter gross domestic product growth of 1.8% based largely on consumer spending, the Federal Statistical Office (Destatis) reported on Friday.

According to the latest figures from Destatis, German GDP grew by 1.9% in the second quarter, as Europe's largest economy slowly emerges from the lockdowns caused by the pandemic last year.

The economy has yet to recover fully. GDP in the third quarter of this year is still down by 1.1% on the figure recorded in the fourth quarter of 2019, the last quarter to be unaffected by the lockdowns.

Consumer demand drove much of the increase in the July-September period, after restrictions on the hospitality sector, shops and sports and fitness facilities began to be lifted from mid-May.

By contrast, supply constraints continue to impact the manufacturing and industrial sectors. Global demand has increased sharply after collapsing at the height of the pandemic. Raw materials and semi-finished goods, particularly semiconductors, are now in short supply.

Production cuts

German manufacturers, the automotive sector in particular, have been forced to cut production and shut down lines for weeks at a time.

As a result, the government and analysts expect the economic recovery to lose speed in the final quarter, as continuing shortages and high energy prices bite.

The government forecast is for a rise in GDP for the whole year of just 2.6%, down from the April forecast of a plus of 3.5%.

But growth next year is expected to hit 4.1%.