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• Germany’s economy saw a sharp 10% drop in the second quarter of 2020, the worst quarterly GDP contraction since records began in 1970.

• Germany’s record decline reflected the impact of an economic plunge across areas including trade, consumer spending, and investment. 

• Unemployment remains a concern with jobs in the country’s major airlines and automotive sectors at high risk.

• Fears are growing over an expected COVID-19 second wave with an influx of tourists and reopening of businesses.

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Europe’s biggest economy slumped the most since 1970, with GDP declining 10% in the second quarter, the country’s statistics authority said in a flash estimate released on Thursday.

Economists had predicted a 9% decline to account for the economic hammering caused by the pandemic, leading to record unemployment and unseen government stimulus responses.

Although the German economy is expected to gradually recover, latest GDP data shows the pace could be slow and painful. 

For the months between April to June, the massive slump in Germany’s gross domestic product was led by declines in exports, consumer spending, and investment, federal office Destatis said. 

Destatis

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“This was the largest decline since the beginning of quarterly GDP calculations for Germany in 1970. It was much larger than during the financial market and economic crisis (-4.7% in first quarter of 2009),” the authority said.

Germany is the first European economy to report second-quarter GDP results. 

On an annual basis, its economy contracted 11.7% despite reopening businesses that followed coronavirus-induced restrictions in the first quarter. 

Last time the country faced a comparable decline was in 2009, when it contracted by 7.9% on an annual basis.

The European Union has introduced an $860 billion recovery fund aimed at the reconstruction of the economic bloc. 

A broader picture of the second quarter is scheduled to be released by Destatis on August 25. Current flash estimates aim to serve high demand from a bunch of politicians, businesses, and the society who wish to gauge the economic uncertainty.

Unemployment remains a major concern in the country, with German airline Lufthansa cutting thousands of jobs and carmaker Daimler expected to slash scores of roles.

New coronavirus case counts are nudging up in the country as fears over tourists coming in lead to concerns of a second wave.

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Pantheon Macroeconomics

Germany’s benchmark DAX index dropped 2.5% in European trading.