Wachstumskurve mit Kugelschreiber symbolisiert die wirtschaftliche Lage.

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  • In Q1 2021, the restrictions imposed due to the COVID-19 pandemic caused economic output to shrink by 1.7% 1 2 . However, looking further ahead, the figures suggest that we will see an economic recovery this year. The vaccination campaign is picking up speed and giving rise to optimism, as is the strong global economy. Last year, in 2020, GDP had fallen by 4.8%.
  • By the end of Q1, industrial production was growing again – despite the fact that some sectors had to face a shortage of intermediate products. Strong domestic demand is causing order books to continue to fill up. Industrial companies continued to have a bright outlook. After declines in the winter months, the construction sector was able to significantly expand its production again in March.
  • Retail turnover saw a strong recovery in March, albeit from a low level. The sector’s outlook then declined somewhat, as the restrictions on contacts were once again extended. Compared to March 2020, the first month to be blighted by the pandemic, all sectors saw their output increase. eCommerce and mail order services saw the strongest rise.
  • The spring revival on the labour market is continuing. In seasonally-adjusted terms, unemployment rose only slightly in April. Gainful activity saw a small increase in seasonally-adjusted terms in March. Notifications of short-time work suggest that this could have already reached its peak this year, at a level far below that of spring 2020.
  • The rise seen in the number of companies filing for regular insolvency in February and March did not continue, with figures down significantly in April. Overall in 2021, however, a significant rise in the number of companies filing for insolvency is to be expected.


The economic situation in May is bifurcated: While the service sectors continue to be restricted by the measures to tackle the pandemic, the industrial economy is proving comparatively robust. It is true that industrial output saw a slight decline in Q1, but the reason for this is not a lack of demand, but a number of supply bottlenecks concerning semiconductor products, which affected the automotive industry, in particular. As a result, slowed down production coincides with a positive development on order books and with very confident export expectations. Business confidence is looking more positive than it has for a long time. At the same time, economic activity in many service industries continues to be marked by the measures taken in response to the pandemic. The GfK consumer climate index fell further in April, due to extension of the lockdown, and remains at a low level. But the latest figures concerning the vaccination drive have given rise to hope and optimism for the industries affected by the restrictions. The development of the economy now depends to a large extent on whether infection can continue to be controlled, and on how quickly restrictions can be eased as a result.

Looking back, the economic recovery in Q4 of 2020 lost significant momentum, due to a second wave of the pandemic and the measures taken to contain this. Nevertheless, a recovery is expected for 2021 overall, even despite the slow Q1 seen as a result of the third wave of the pandemic (-1.7%, according to preliminary data issued by the Federal Statistical Office). Once all citizens have received the possibility to get vaccinated and restrictions have been lifted, the potential for growth will be all the stronger. At that point, private consumption, which is strongly dependent on social contact, is likely to pick up again. Germany’s foreign trade and the industrial economy that is closely linked to it are proving robust. Similarly, and despite the pandemic, the labour market saw a spring revival. The notifications for short-time work suggest that the peak of this instrument might already be behind us, meaning that figures could be expected to fall from now on.


The global economy is recovering, even whilst it still finds itself overshadowed by the pandemic. Global industrial output fell by a small margin of 0.3% in February, following nine consecutive months of growth. Overall, industrial output was well above its pre-crisis level. Global trade grew by 0.3% in February, also to reach a point well above its pre-crisis level. The sentiment indicators suggest that the global economy is set to continue its recovery. The combined J.P. Morgan / IHS Markit purchasing managers’ index rose again in April to reach 56.3 points (March: 54.8 points), which is well above the growth threshold of 50 points. One reason for the more confident mood is likely to be the global vaccination programmes. Sentiment among services providers improved significantly and beyond the levels observed in the industrial sector. This slower improvement in sentiment among industrial companies is linked to the global bottlenecks affecting intermediate products including computer chips and timber.


Germany’s foreign trade continued to pick up noticeably. In March, the value of goods and services exports rose by 0.9% over the preceding month, both adjusted for seasonal variations and on a nominal basis. This compares to 2.3% and 1.5% in January and February respectively. The quarterly comparison shows a significant 3.7% rise in exports. Imports in March were up a strong 4.7% (February +3.3%, January -0.6%). The quarterly comparison shows a plus of 4.0%.

At national level, too, the restrictions imposed on account of the pandemic have virtually no impact on the leading indicators for the external economy, which is dominated by industry. The balance of ifo export expectations for the manufacturing sector rose sharply again in April, to a level that was last exceeded more than ten years ago, in January 2011. Following a slight reduction in February (-0.2%), foreign orders increased by 1.6%. This means that the overall outlook for Germany’s foreign trade is positive, not least due to the strong cyclical development seen in Asia and the United States.


Output in the goods-producing sector rose significantly in March compared to the preceding month, driven mostly by the construction sector. Output expanded by 2.5%, following a decline of 1.9% in February and of 2.2% in January. The industrial sector registered a rise in its output of 0.7% (February: -1.9%, January: -0.6%). Construction output grew by a strong 10.8% in March, after two months marked by lower output due to the cold weather (-1.4% and -10.7%). Output in the goods-producing sector as a whole fell by 0.9% in Q1. While industrial output decreased by a mere 0.3%, construction output saw a significant fall of 4.0%. Within the industrial sector, the automotive industry saw its output decline by 12.1%, whereas mechanical engineering companies increased theirs by 6.0%.

New orders in the manufacturing sector rose again by 3.0% in March, making this the sixth consecutive month in which the sector surpassed its level of February 2020, the month preceding the pandemic. Again, this recent surge was driven by increased domestic demand (+4.9%), but foreign orders also picked up markedly (+1.6%). Orders for machinery, data processing devices, electronic and optical products and other vehicles accounted for most of the rise in new orders. Excluding large-scale orders, new orders rose by 1.6%. The quarterly comparison shows a strong plus of 2.4%.

The outlook for industrial activity remains positive. The ifo business climate index continued to inch up further; ordering activity is very strong. However, there are risks caused by the uncertainty around the further development of the pandemic and by the bottlenecks concerning intermediate products, such as computer chips and timber.


Retail turnover (excluding motor vehicles) has picked up considerably over recent months. Between February and March, this turnover rose by 7.7% (adjusted for price, season, and the number of calendar days), albeit from a low starting point. This month-on-month increase was the second largest since March 2020, when restrictions to contain the COVID-19 pandemic were first introduced. Most recent figures show that the pre-crisis level of February 2020 was surpassed by 4.4%. Compared to March 2020, the first lockdown month, the increase (adjusted for price) even reached 5.5%. The largest rises in turnover were seen in eCommerce and mail orders. Retail sales, including cars, recovered a little in February compared to the preceding month (+1.5%), having fallen by a hefty 11.4% in January. New vehicle registrations by private owners declined by 7.4% in April, following a short recovery from the slump they suffered at the beginning of the year, when the temporary reduction in the VAT rate expired. However, compared to April 2020, the worst point in the crisis, the number of new vehicle registrations has significantly increased.

Overall, ifo business expectations in the retail sector became slightly more negative in April, following a short recovery from the massive fall in January. Likewise, the GfK consumer climate index fell in response to the pandemic and the extension of contact restrictions.

Consumer prices were up 0.7% in April, compared to the preceding month. This compares to a 0.5% increase between February and March. The inflation rate, the year-on-year development of prices, stood at 2.0% in April. This is a significant increase over the level seen in the second half of 2020, when the inflation rate had been almost continuously negative due to the reduced VAT rates. Reasons for the increase in the inflation rate in the first months of this year include the recovery in import and raw materials prices, and the introduction of carbon pricing. Unlike last year, when energy prices put a strong damper on the consumer price index, they are now among the factors pushing up the inflation rate. Once these special effects disappear from the inflation statistics at the turn of the year, the upward trend in consumer prices is likely to weaken again. As of now, there is nothing to suggest a sustained rise in the inflation rate. Having stagnated since the beginning of the year, the core inflation rate (excluding energy and foodstuffs) fell slightly, to +1.3% in April (December: +0.4%).


Despite the burden caused by the pandemic, the labour market has seen its usual spring revival. If the infection figures show further improvement, this revival could even become stronger. Nevertheless, one year into the pandemic, COVID-19 is still leaving a strong mark on the labour market. Unemployment increased slightly by 9,000 in April in seasonally adjusted terms, whereas underemployment fell marginally by 3,000 persons. According to the original data, unemployment fell markedly by 56,000, to now stand at 2.77 million people. The year-on-year gap was reduced to 127,000 people, mostly due to the base effect seen in April 2020. As demand for workers picked up in March 2021, gainful employment increased slightly by 16,000 in seasonally adjusted terms. Employment subject to social security contributions rose by 15,000 persons in February (seasonally adjusted). Extrapolations show that the number of people in short-time work saw a slight increase in February (3.3 million people). Notifications of short-time work (approx. 116,000 between 1 to 25 April, compared to 234,000 in March, 535,000 in February, and 981,000 in January) suggest that the peak might be behind us now, at a level far below that of spring 2020. The survey-based leading indicators of the Institute for Employment Research and ifo moved up again in April, reaching their highest scores since January 2020 and May 2019 respectively. The industrial sector is increasingly hiring new employees, whereas the hospitality and tourism sectors continue to shed workers.


The number of regular insolvency proceedings did not continue to rise in April. The Federal Statistical Office announced a 17% reduction in the number of companies filing for insolvency compared to the preceding month. This is backed up by the insolvency indicator of the German Economic Institute (IW) in Halle. In other words, the strong rise in insolvency proceedings begun in the two preceding months no longer continued. But even though it has so far been possible to stave off a large wave of insolvencies by loosening the rules governing notification requirements, and by supporting companies on a large scale, a significant rise in the insolvency figures must be expected over the year. A likely figure, according to most experts, is anything between 3,000 and 7,000 additional insolvencies compared to last year’s figures.
[1] Press release by the Federal Statistical Office of 30 April 2021.
[2] The report is based on statistical data that were available as of 12 May 2021. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted for calendar-day and seasonal variations.