“The German economy is gradually picking up from its severe slump in the wake of the coronavirus pandemic,” according to the Bundesbank’s latest Monthly Report. Following the massive decline in gross domestic product in the spring by almost one-tenth in seasonally adjusted terms, the Bundesbank's experts anticipate a strong countermovement in the third quarter of 2020. Both industry and the services sector in the third quarter will still be significantly below their pre-crisis levels, however.

Industry continues to recover

German industrial output continued to recover at a slower pace in July 2020, the Bundesbank reports. While this meant that there was a further narrowing of the gap compared with the pre-crisis level, the shortfall was still significant. This was especially true of capital goods producers and the automotive industry in particular. The orders situation presents a similar picture. In seasonally adjusted terms, there was a further month-on-month rise in demand for German industrial products, although it was no longer as strong as in May and June. Industrial sales also showed a further increase according to the Monthly Report. “The catch-up movement in the automotive sector stood out in particular, following the dramatic slump in April.”

The Bundesbank expects the recovery to continue as the year progresses, albeit at a slower pace. Industrial enterprises were looking with greater optimism to the future again, with the majority expecting to step up their output in the coming months according to results of the Ifo business survey. Expectations regarding export business remain subdued.

Labour market showing first signs of recovery

For the first time since the onset of the pandemic, there was a slight rise in employment  again in July 2020, according to the Monthly Report. The seasonally adjusted number of persons in work in Germany went up by 53,000 persons or 0.1% on the month. In particular, some previously hard-hit services sectors, such as the hotel and restaurant sector and wholesale and retail trade, have been taking on staff again. The decline in manufacturing continued, however, according to the Bundesbank's economists.

The instrument of short-time working was still being used on a considerable scale, although the numbers of those on short time were down. According to latest data from the Federal Employment Agency, the peak had already been reached in April at 6 million short-time workers. By June, their number had fallen by one-tenth to 5.4 million. In addition, the average number of hours worked per short-time worker had fallen significantly, meaning that the volume of work lost in short-time work had already shrunk by more than one-quarter compared with the peak in April.

The unemployment rate remained constant at 6.4% for the third consecutive month. “According to leading labour market indicators, the recovery trends in employment and unemployment could continue,” write the Bundesbank's experts.