PK Dryden Associates - Supply Problems Impact German Recovery

PK Dryden Associates - Supply Problems Impact German Recovery

Tokyo, Japan - 06/10/2021 — PK Dryden Associates comments as shortage of certain goods affects German industrial output, weighing on economic recovery.

Germany’s economy contracted in 1.7% in the first quarter of this year after the pandemic forced the government to implement restrictions that saw the shutdowns of businesses, shops and restaurants. A brutal second wave and a period of bad weather had a negative impact on household consumption, weighing on the economy’s growth.

The German economy, once the powerhouse of the euro zone, had shown signs of recovery after recording expansion of 0.5% in the final quarter of last year, helped by strong demand for German goods by the likes of China and the US. 

“Germany’s sluggish vaccine rollout and a high number of infections resulted in a performance that was worse than that of Germany’s economic peers in the first quarter,” said Mr. Fumihiro Maruyama, Chief Finance Officer at PK Dryden Associates.

Now, as the infection rate is being managed more effectively, Germany faces yet another challenge in recovering from the pandemic. A shortage of timber, semiconductors and other goods drove an unanticipated plunge in German industrial activity last month.

Data recently released by the Federal Statistics Office revealed that industrial output had fallen 1 percent in April after an increase of 2.2 percent the month before. This was a sharp contrast with the predicted 0.5 percent increase forecasted by economists.

Economists at PK Dryden Associates say the weaker than expected industrial figures indicate that the German economy will likely depend on consumer spending to boost its struggling economy as it recovers from the global health crisis.

Last month, Germany's DIHK Chambers of Industry and Commerce increased its forecast for growth for this year to 3 percent, up from an earlier estimate of 2.8 percent. However, PK Dryden Associates economists noted that this was a less optimistic outlook than that of the German government’s prediction of 3.5 percent growth for 2021.

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