(Sharecast News) – Germany’s economy shrank by 5% in 2020 as Covid-19 hit domestic and foreign demand in Europe’s biggest economy, official figures showed.
The result was slightly better than a consensus estimate of a 5.2% drop but this was because there were more working days in 2019. Adjusting for the calendar, output fell 5.3% in 2020 compared with a 0.6% increase the year before, Destatis said.
The plunge in output ended a 10-year growth period following the financial crisis and affected almost all sectors.
Industry, which accounts for more than a quarter of Germany’s economy, suffered a 9.7% drop with manufacturing output falling 10.4% as global supply chains were hit by the pandemic. Consumer spending fell 6% as services were badly affected.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the numbers suggested output was flat in the fourth quarter which is “just about believable” with spending on goods and manufacturing offsetting weak services. Figures for November showed German factory orders riding out the resurgence of Covid-19.
“These are grim numbers, but also relatively solid compared to the rest of the eurozone,” Vistesen said. “Looking ahead, we think Germany will underperform in Q1, due to a setback in goods spending after the increase in VAT, but that shouldn’t change the picture of an economy that has dodged a bullet during the pandemic, comparatively speaking, and which likely will enjoy quicker recovery than its peers in 2021.”
Germany’s unusually large manufacturing sector, the biggest in Europe, has helped the country withstand the impact of the Covid-19 crisis with factories staying open and export demand reviving in the second half of the year.