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Germany: The Consumer Makes His Big Comeback

With all the green lights and a consumer seeing wages and incomes rise (in addition to excellent savings), Germany is on a good momentum to reach the pre-pandemic level in the coming months.

By EC Invest

The consumer was the driving force behind the recovery of the first European economy in the second quarter. Revised slightly upwards against the first publication at the end of July, German GDP grew by 1.6% compared to the first quarter of the year and 9.4% over one year.

As is the case everywhere else, this last figure is to be put into perspective. It is primarily due to the completely atypical economic situation that the planet was experiencing in the 2nd quarter of 2020, a period marked by the first wave of the pandemic. Over one year, economic activity, therefore, starts from a shallow base.

And while it is true that the pandemic is far from over, it is also true that humanity has adapted to it to the extent possible.

German growth is largely supported

GROWTH IN GERMANY

The consumer is in the spotlight, with spending rising by 3.2% compared to the previous quarter. However, public expenditure also played an important role (+1.8%). While the increase in investment was modest (+0.3%), it was no less critical than exports, up 0.5%. As a result of the government’s support measures, employment is virtually unchanged.

Nevertheless, the number of working hours increased by 6.8% over one year — a sign of the activity comeback. Furthermore, net wage and disposable income are growing (6.2% and 3.4%, respectively).

Since the saving rate remains very high, at 16.3% of disposable income, Germany is in a position to stay on the path of solid growth in the coming quarters. However, we must not be under any illusions: despite these promising figures, German GDP is still down by 3.3% compared to the fourth quarter of 2019, the last quarter before the pandemic hit. That said, given the current dynamic, a return to the top before the end of the year is within reach.

Eurozone equities remain in the recommended portfolio by Euroconsumers Invest.

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