Saturday, August 28, 2021
Cooling off after the summer boom
“The zenith of the boom is behind us”
Germany is emerging from the Corona crisis with a lot of momentum, old heights are likely to be reached again this year. The trend is also positive on the labor market. But economists see signs that the boom is slowing down towards autumn.
The German economy is booming and, according to leading experts, could reach pre-crisis levels again this year. “The German economy is currently still at an economic summer high, but the zenith of the economic upswing should already be behind us,” said the European economist at Allianz Insurance, Katharina Utermöhl. Leading indicators pointed to a slowdown in autumn – but not to a crash.
In view of the relaxation of the Corona, the service sector and private consumption have recovered, as Veronika Grimm from the Federal Government’s Advisory Council explained. However, supply bottlenecks, especially for semiconductors, continued to be a major problem for the industry. “In the second quarter, German industrial production even declined despite the high demand,” said Grimm. The automotive industry is particularly affected.
Nevertheless, Grimm expects strong economic growth. Perhaps the pre-crisis level will be reached by the end of the summer, said the economy. “If the supply bottlenecks in industry and construction do not worsen or even relax, the well-filled order books should provide a boost in production.”
Positive trend in the job market
Katharina Utermöhl also expects above-average growth in the coming quarters despite ongoing supply chain bottlenecks, cooling foreign demand and increasing delta headwinds. She believes the economy will grow by 3 percent this year and 4 percent next year.
The good economic development is also having a positive effect on the labor market. “Short-time work has fallen sharply in the last few months,” said Deutsche Bank economist Jochen Möbert. The number of vacancies has recently reached pre-crisis levels and the number of employees has risen sharply in recent months. “In short, the job market is booming.” For August, the expert expects that the seasonally adjusted number of unemployed will decrease by around 70,000.
The Federal Employment Agency publishes its labor market report for August on Tuesday. In July the number of unemployed had fallen to 2.59 million. According to Allianz economist Utermöhl, this trend is likely to continue for the time being: “In August, the labor market should again defy all seasonal customs and again record a significant decline in unemployment.” Seasonally adjusted, the number of unemployed is likely to decrease by around 60,000.
Möbert is less optimistic about the rest of the year, however: “Following the summer boom, growth and labor market demand should level off again significantly over the winter.”