German economy contracted 0.7 percent in 4th quarter of 2021

Economic output remains 1.5 percent below pre-pandemic levels.

German economy contracted 0.7 percent in 4th quarter of 2021

FRANKFURT – The German economy contracted 0.7 percent in the final quarter of 2021, preliminary data released by the German statistics office showed on Friday.

Over the entire year, the German economy grew 2.8 percent. That’s slightly above the preliminary estimate the office released earlier this month, which came in at 2.7 percent. That figure assumed activity contracted between 0.5 to 1.0 percent in the final quarter.

Germany economic output remains 1.5 percent below pre-pandemic levels, after collapsing by 4.6 percent in 2020.

One the bright side, economic performance increased in nearly all sectors last year. However, the country’s export-driven economy still remains especially hard hard by global supply bottlenecks, leaving performance far behind expectations.

Looking ahead, longer-term forecasts suggest an improving picture. In December, Germany’s Bundesbank projected economic activity to gain “significant momentum” in the spring, with full-year growth for 2022 coming in at 4.2 percent.

Leading indicators also suggest that the German economy may be leaving the worst behind. Earlier this week, Germany’s key Ifo economic climate index improved noticeably in January. The PMI survey, also released early this week, pointed to an easing of the supply problems that have been such a severe drag on Germany’s export-driven economy.

“The German economy will stage an impressive comeback in the spring,” projected ING economist Carsten Brzeski. “Admittedly, geopolitical risks could still spoil the growth party but the end of social restrictions and significant relief in global supply chains should combine to give the German economy an enormous boost.”