German Q1 Growth Set To Shrink, EZ 2nd Estimate Could Worsen
German officials are scheduled to hold a press conference after releasing growth estimates for the first quarter.

- German quarterly growth forecast at -2.2pct (prev 0.0pct)

- Record EZ Q1 contraction of 3.8pct may widen

- German data due Friday at 08.00 GMT

- EZ 2nd Q1 GDP estimate set for 09.00 release


By Eric Culp

European Editor, LiveSquawk News



Frankfurt, 13 May 2020 (LS NEWS) – German first-quarter growth is expected to show a sharp decline that will avoid the steeper drops in other Continental economies, but analysts fear any drop beyond current projections could increase the record contraction initially reported for the Eurozone.


Economists’ expectations show Germany’s seasonally adjusted first-quarter growth falling at a quarterly rate of 2.2pct following 0.0pct in the final three months of 2019. Non-adjusted annual growth in the first quarter is expected to drop 1.6pct versus an increase of 0.3pct in October-December, according to the survey.


An hour after German officials are set to release first-quarter data at a Berlin press conference, the European statistics office Eurostat is scheduled to publish its second euro-area growth estimates for the period. The numbers are expected to match the -3.8pct quarterly rate—the worst since the introduction of the euro in 1999—and the -3.3pct annual rate announced late last month.


Quarterly contractions in major Eurozone economies were largely worse than expected, according to data released in April. Growth fell 5.8pct in France and 5.2pct in Spain. However, the 4.8pct decline in Italy beat market forecasts.


Source: Pantheon Macroeconomics

Better or worse?


Jack Allen-Reynolds, senior Europe economist at Capital Economics, said he expects the German contraction to be a little less than the consensus, namely 2.0pct.


“We already know that German industrial production excluding construction fell by a hefty 11.2pct month-on-month in March. But construction held up surprisingly well at 1.8pct. As a result, industrial production including construction fell by only 1.2pct in quarterly terms in the first quarter, which will have subtracted around 0.3 percentage points from quarterly GDP.”


March’s horrid 11.3pct monthly decline in Eurozone industrial production and sharp national drops in output have raised concerns about the possibility of an even larger drop in the currency-area’s economic activity in the first quarter, according to Claus Vistesen, chief European economist at Pantheon.


“The main question is whether these data will lead to a downward revision of Friday’s second first-quarter Eurozone GDP estimate. We still think that GDP fell by close 4.5-to-5pct in the first quarter, but that forecast is mainly driven by our assumptions for construction and services output data in March.”


Market-watchers beware: With the lockdown hindering data collection, economic indicators compiled since mid-March are subject to the possibility of much larger adjustments than before the pandemic, analysts say.


Germany in freefall


As the second quarter approaches its midpoint and Germany and other countries continue to loosen their lockdowns, Deutsche Bank says it expects Europe’s largest economy to contract by an eye-popping 9pct this year, and the April-June period will be hellish. “With weaker-than-expected March hard data and shocking April survey data, we now see second-quarter GDP falling by 14pct on the quarter.


“In the 2009 recession private consumption acted as a massive shock absorber. Given the lockdown, social distancing and a likely severe hit to income expectations, we expect private consumption to fall by 10pct in 2020.”


The Eurozone economy is expected to shrink by 12pct this year, Deutsche said.