German economy stutters as coronavirus curbs push up savings rate

The German economy shrank more than expected in the first quarter as coronavirus-related restrictions spurred householders to put more money than ever into savings, data showed on Tuesday.

 

Europe's largest economy contracted by 1.8 per cent quarter on quarter and by 3.1 per cent on the year, the Federal Statistics Office said. The readings, for which a Reuters poll had forecast drops of 1.7 per cent and 3.0 per cent respectively, were significantly weaker than the euro zone average. German households' disposable income increased slightly as the government ploughed billions of euros into job protection schemes and cash handouts such as extra child benefits. But curbs linked to containing the pandemic also made it harder for consumers to spend it.

 

“The drop in consumption is colossal," VP Bank Group economist Thomas Gitzel said. Household spending fell by 5.4 per cent on the quarter as the savings rate rose to a record high of 23.2 per cent. Company investments in machinery and equipment fell slightly, though construction activity rose.

 

Exports increased by 1.8 per cent on the quarter helped by strong demand from the US and China, while imports rose 3.8 per cent, meaning net trade pushed down overall growth as well.

 

Germany's biggest landlords seek to reassure Berliners over $22-bn merger

 

Germany's two biggest listed landlords Vonovia and Deutsche Wohnen have agreed to join forces in an 18 billion-euro ($22 billion) deal that they hope will defuse tensions over soaring rents ahead of general elections in September.

 

The country's biggest merger this year will create a European real estate giant with 550,000 apartments. It comes as Deutsche Wohnen has become the focus of popular anger in Berlin over tenant rights and affordable housing.