German GDP drop revised, but still dire, economists say
Germany’s recession was not quite as deep as previously thought, according to revised GDP figures, but it was still the worst in the history of the reunified country.
Output plunged by 9.7% quarter-on-quarter, compared to the 10.1% reading previously reported by Germany’s federal statistics office.
The drop is considerably larger than that seen even during the financial crisis of 2008-09.
Carsten Brzeski, chief economist at ING, an investment bank, said:
The contraction of the economy was somewhat milder than in the first estimate, illustrating how difficult it currently is to capture the lockdown-driven swings in any economy with traditional macro models. […] The only good thing about all this data is that it provides a final glance in the rearview mirror.
Looking ahead, it does not take a rocket scientist to predict that the economy will have one of its best quarterly performances ever in the third quarter.
At the same time, however, the structural impact of the crisis is also surfacing, limiting too much growth enthusiasm.
Introduction: FTSE 100 gains amid US-China trade hopes
Good morning, and welcome to our live coverage of business, economics and financial markets.
Investors appear to have taken heart from an easing in US-China trade tensions, after officials from both sides reaffirmed their commitment to reaching a deal.
US trade tepresentative Robert Lighthizer, Treasury secretary Steven Mnuchin and Chinese vice premier Liu He gave the commitment to reaching a phase 1 deal in their first formal dialogue since early May.
The tone of the talks – after months of worsening diplomatic relations – helped to boost global stock markets. The FTSE 100 rose by 0.6% in the opening minutes of trading, while Germany’s Dax and France’s Cac 40 gained 0.7% and 0.5% respectively. Japan’s Topix index rose by 1.1%, Australia’s ASX 200 rose by 0.5% and Korea’s Kospi gained 1.4%. China’s CSI 300 tracking blue chips in Shenzhen and Shanghai was flat.
Before the coronavirus pandemic the trade tensions between the US administration of Donald Trump and China were regularly named by economists as the biggest threat to the global economy. Even now, positive news on the relationship has the power to move markets.
However, optimism over potential progress in the talks will likely be tempered by the knowledge that Trump is likely to make the relationship with China central to his re-election effort ahead of November’s election.
That election battle is now in full swing, with a Republican convention full of dark warnings about the future of the USA as it got underway last night. The Guardian’s Daniel Strauss reported:
Monday night’s theme was officially the “land of promise,” but the collection of speeches offered an almost apocalyptic vision of what’s at stake in November’s elections
Elsewhere, German GDP was slightly better than expected in the final reading for the second quarter. However, it still registered a dizzying 9.7% drop in output between April and June, compared to the 10.1%* drop given by the first reading. (*This has been corrected.)
In UK corporate news, drug company AstraZeneca said it has started phase 1 trials (with small numbers of participants) for a “monoclonal antibody combination for the prevention and treatment of COVID-19”. The treatment, labelled AZD7442, has been funded by the US government and the company hopes it will mimic natural antibodies to give six-month protection against the virus.
- 9am BST: Germany Ifo business climate index, August (previous: 90.5; consensus: 92.2)
- 11am BST: UK Confederation of British Industry distributive trades retail index, August (prev: 4; consensus: 8)
Source: The Guardian