MNI DATA PREVIEW: Germany Q1 GDP To Fall, Worse To Come In Q2

--Markets look for GDP 2.2% Q/Q decline, down 2.0% Y/Y

By Irene Prihoda

     LONDON (MNI) - Germany's GDP is expected to contract by 2.2% on a quarterly

basis in Q1, which would mark the lowest level since the first three months of

2009 and comes after the economy stagnated in Q4. The annual growth rate is

forecast to fall by 2.0% in Q1 following a deceleration to 0.4% in Q4.

     Strict social distancing measures were introduced on March 23 in all German

states, slightly later than in Italy, France or Spain. As a result, Germany is

expected to outperform its European peers.

     Nevertheless, activity eased significantly in March with retail sales

plunging by 5.6% and reversing January's and February's monthly gains. The

countries important industrial sector saw an even steeper contraction in March.

Industrial output plummeted by 9.2% which is the lowest level since records

began in 1991. A sharp 31.1%-drop in the automotive sector drove the monthly

decline. The construction sector fared slightly better and posted a monthly gain

in March.

     --Q2 OUTLOOK

     The outlook for Q2 is bleak with the Ifo institute forecasting a decline of

12.2%, downwardly revised from their original forecast of a 9.8% drop. Strict

restrictions remained in place in April in most states and the country only

started to open-up gradually.

     The industrial sector is expected to suffer in the coming month, indicated

by the Ifo production expectations index for the next three months. The index

plummeted to -51.4 in April, to the lowest level since German reunification.

Moreover, Destatis' truck toll mileage index, which strongly correlates with

industrial production, slumped to the lowest level on record, outpacing lows

seen during the financial crisis.

     Destatis further notes that demand for daily used goods is falling in April

after March's significant increase, suggesting downward pressure on retail sales

in April. Some shops were allowed to open again towards the end of April. May

saw further easing of restrictions which should provide a small boost for sales.

Nevertheless, the German retail federation HDE stated that despite the reopening

of shops, non-food retailers recorded a lower turnover at the beginning of May

compared to previous years.

--MNI London Bureau; +44 0203 865 3814; email: irene.prihoda@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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