German Bundesbank: Germany Could Regain Pre-Pandemic Output Levels in 3Q

19 July, 2021

By David Barwick – FRANKFURT (Econostream) – The German economy could regain pre-pandemic output levels in the current quarter, the German Bundesbank said on Monday in its latest monthly report.

‘Provided there are no significant setbacks in view of the pandemic and the supply bottlenecks in industry ease at least gradually, the overall pace of economic expansion should be even stronger in the summer quarter and real GDP could reach its pre-crisis level again as early as the third quarter’, the German central bank wrote.

According to the Bundesbank, GDP in the second quarter ‘probably increased strongly again’, so much so as ‘to have more or less made up for the severe setback suffered in the winter quarter’, when pandemic containment measures were reimposed.

As of May, a loosening of restrictions allowed a strong rebound in the services sector that ‘largely’ drove the recovery, the report stated.

Starting with the current month, the recent easing of inflation readings in Germany would give way to ‘significantly higher HICP rates’, though a statistical effect due to an adjustment of HICP weightings will initially mute this, the Bundesbank said.

‘When this weakening effect fades out at the end of the year, rates above 4% are temporarily possible from today's perspective’, the central bank said.

The Bundesbank reiterated its optimistic prognosis for labour market developments: ‘Unemployment is expected to fall sharply in the next three months’, it said.