Germany Avoids A Double-Dip Recession, But Only Just

Outlook is strongly driven by vaccinomics

Looking ahead, extended and stricter lockdowns do not bode well for the economy. Given that one-off positives like inventory build-ups and construction might no longer help as they did in the fourth quarter, and demand from China could also weaken on the back of lockdowns and the Chinese New Year, the first-quarter performance of the German economy will be weak. The fact that the vaccination campaign had a poor start doesn't help.

While the number of new infection cases has come down in recent days, fears of new virus variants and the slow vaccination pace are likely to keep the economy in lockdown grip for a while. In this regard, it is interesting that politicians are calling for a change in the vaccination strategy, shifting the focus to younger age groups, as the Astra-Zeneca vaccine will not be given to the 65+ age group in Germany. Whatever the outcome of these discussions we still expect a gradual easing of the lockdown measures going into the second quarter and consequently a strong rebound of economic activity.  

The German economy got away with a black eye, avoiding a double-dip in the final quarter of 2020. However, given the current lockdown and vaccination situation, it is hard to see how it can perform the same magic again in the first quarter.  

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