“The recession is over”: German economic hope is growing

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The German economy could recover from the corona shock faster than many thought. Economists are optimistic due to promising signs. But they warn of premature cheers.
Economists at leading financial institutions believe that the German economy is on a recovery course after the Corona slump. “The leading indicators make us optimistic,” said Marc Schattenberg from Deutsche Bank in a survey by the dpa news agency. The second quarter, which marked the height of the corona crisis, was surprisingly robust. With regard to the latest indicators, Katharina Utermöhl from the Allianz Group said: “The recession is over.” The German economy was no longer in intensive care. The situation remains critical, however, and setbacks cannot be ruled out.

Exports have also picked up again, and the losses in the Chinese business, for example, are not as great as feared, said Schattenberg. Nevertheless, he warned: “In the second half of the year, trade risks will also come into focus again.” The news that a disorderly Brexit is likely after the end of the transition period at the end of the year is not good, he emphasized. The development in the USA is being observed with great uncertainty, where the corona crisis is particularly damaging.

Utermöhl expects an increase of 119,000 unemployed in July compared to June. With a total of 2,972 million unemployed, the three million mark would come close. Deutsche Bank economist Schattenberg even sees a seasonally adjusted figure just above the three million mark.

Robust job market

This does not appear to have an impact on economic expectations. “Things have been improving since June, and even more dynamism seems to have been apparent since July,” says Jens-Oliver Niklasch from Landesbank Baden-Württemberg. “After the deep fall in March and April, it will likely take quite some time before the pre-crisis level in production and sales is reached again,” he warned.

The job market is surprisingly stable, said Niklasch. “It is likely that the seasonally adjusted increase in the number of unemployed in July will be only marginally around 50,000.” In July there were again announcements of job cuts in industry. “But the numbers passed around mostly extend over longer periods of time.”

However, he fears that a wave of bankruptcies as a result of the corona pandemic could occur in the fall, with consequences for the economy and the labor market. In September, the corona disclosure requirement for bankruptcies resumed.

Fritzi Köhler-Geib, chief economist at the state-owned KFW group, is also pushing the brakes on euphoria. “The number of unemployed should continue to increase in the next few months as there will be more layoffs and companies will be hiring less,” she said. The number of registered vacancies in May was 570,000, more than 200,000 lower than in the same month of the previous year. Unemployment has increased especially among those without a professional qualification and young people.

“It will be important in the coming months to ensure that unemployment does not solidify and leads to permanent disadvantages,” said Köhler-Geib. For this, apprenticeships and qualification offers would have to be created in large numbers.

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