German GDP rebounds in Q2 but shortages loom large

Germany’s GDP recovered more in the second quarter than first estimated, according to data released Tuesday, but global supply chain issues continue to weigh on the outlook for Europe’s largest economy.

After shrinking in the first quarter, German GDP grew 1.6 percent between April and June this year, according to the national statistics agency Destatis, up from an initial estimate of 1.5 percent. 

The figure was significantly higher compared with the same period last year -- by 9.8 percent -- when coronavirus restrictions shut down large swathes of the economy. 

Nonetheless, the indicator remained below pre-crisis levels, down 3.3 percent in comparison with the three months before the start of the pandemic.

The boost given to the economy by the end of lockdown restrictions has been “undermined by the negative impact from supply chain frictions,” according to ING analyst Carsten Brzeski.

Increasing prices for raw materials and the shortage of key components, such as semiconductors, which are widely used in new technologies, have disrupted the operations of major companies globally.

Accordingly, Brzeski sees “supply chain frictions and not the coronavirus as the biggest risk for the German economy in the second half of the year.”

Separately, the German finance minister Olaf Scholz told the Funke media group over the weekend that he expects to see the economy return to pre-crisis levels by the “beginning of 2022”.