Economic forecasting: the secret of the German miracle cure

Ja, is the pandemic over? At least the current economic and political debate suggests that Germany has the worst after months of recession. And the current data is also cause for optimism. Much is reminiscent of a “miracle cure for the German economy.”

There was talk of a historic recession a few weeks ago, but the economy appears to be getting away with the pandemic more lightly than expected. This could also be due to the fact that Germany’s self-healing powers are not based only on exports, which have been badly affected by the Crown crisis. Germany has long been listed on the stock exchanges as a European growth champion. Now optimism has also reached the real economy.

The federal government took the lead among the optimists and quickly revised its economic forecast higher. Instead of the less than 6.3 percent previously assumed, the federal government now expects a 5.8 percent drop. While this remains the steepest decline in postwar history, it is roughly at the same level that the country already experienced during the 2009 financial crisis. At that time, economic output fell 5.7 percent.

The Crown crisis, however hard it continues to hit the economy as a whole, has apparently lost some of its historical horror in recent weeks. The situation is reminiscent of a storm warning, in which the dreaded hurricane is degraded to a severe storm. If it stays that way, it’s open. Today, analysts are even more cautious. A consensus forecast from the Bloomberg news portal currently foresees a decline in growth of 6.1 percent.

But at least the Federal Minister of Economy Peter Altmaier (CDU) is optimistic: “We have hit bottom.” The economic low point occurred in May, and since then things have risen again. “The rally has started faster and more broadly than we dared hope,” he said. The economy minister even foresees that this year’s economic recession will not exceed less than 5.8 percent.

Personally, he expects a 0.2 percent better result, Altmaier said. If you’re right, the crisis of the crown with the shutdown of the state-run economy would be even less dramatic than the financial crisis of more than ten years ago.

Altmaier was blown away by the labor market: despite the Crown crisis, the number of unemployed in Germany remained below three million. It moved in August to the previous month in the usual 45,000 of the season to 2,955 million, as announced by the Federal Employment Agency (BA). As in July, there was no further increase related to the unemployment crown. If seasonal fluctuations are excluded, the number dropped by as much as 9,000. The unemployment rate increased to just 6.4 percent. Also with a view to the development of the previous year, this speaks “of a certain normalization”, said the head of BA, Detlef Scheele. The “massive use” of part-time work contributed to the stabilization.

The sociopolitical spokesman for the CDU / CSU parliamentary group, Peter Weiß, described the surprisingly resilient unemployment rate as a “little sensation.” “It is quite obvious that German companies are still more likely to use short-time work and confidence in a recovery in which they will have to rely on their employees again,” he said.

Therefore, Germany is weathering the crisis much better than other European countries. For Italy, France and Spain, a double-digit drop in economic output is still expected.

Stock exchanges also reflect different growth rates. While the Dax initially fell as sharply as the indices of Italy, Spain or Great Britain, the German stock market barometer has clearly differentiated itself from European competition since mid-April. The Dax is now trading less than two percent below its level at the beginning of the year. Italy trades 15 percent less, France 17 percent and Spain even 26 percent.

Germany’s unimaginable resistance is also the result of trillion dollar government interventions. In the first half of the year alone, the German state incurred new debts of more than 51,000 million euros. The money is also spent on part-time jobs, ensuring that fewer unemployed people appear in the statistics. According to preliminary extrapolated data, according to the BA, 5.36 million employees received benefits for part-time work in June. But other countries have also supported their economies.

It may also be beneficial that Germany has not been as affected by the pandemic as its neighbors. At the same time, large-scale bailout programs are likely to have helped keep the concerns of employees, businesses and traders in check despite the crisis. Even if most of the help has not yet been requested, the psychological effects should not be underestimated. The country’s strong budgetary position compared to other nations makes aid promises seem particularly credible.