At the dawn of the COVID-19 pandemic, Altmaier, former minister of the German Federal Ministry of Economy and Energy, vowed that Germany would be the locomotive pulling Europe and the global economy out of recession. But now, Germany is more like a laggard in the European economy.
On the 28th local time, the latest data released by the German Federal Statistical Office showed that Germany's gross domestic product (GDP) contracted by 0.7% (expected -0.3%) in the fourth quarter of last year.
Germany's economy stalled, in stark contrast to the sharp growth of the French economy next door. Data released by France's National Statistical Office on the same day showed that the country's economy grew by 0.7% month-on-month in the fourth quarter of last year. 2021 was the strongest year for the French economy since 1969.
The last time Germany's economic growth lagged significantly behind that of its European neighbors was more than 20 years ago. This time, what is it that has turned Germany from a Locomotive of the European Economy into a laggard?
Supply bottlenecks are dragging down economic growth
Salomon Fiedler, an economist at Berenberg Bank in Germany, said that the weakness of the German economy is due to the fact that the country's economic structure is dominated by manufacturing, and it has an export-oriented nature, which is vulnerable to global supply bottlenecks.
According to the German Federal Statistical Office, manufacturing as a share of the country's GDP is about 21%, much higher than that of major developed countries, and has remained stable since 1995.
Throughout last year, the global upstream chip production capacity continued to tighten, restricting the production capacity of German automobile and other manufacturing industries. Data from market research firm Susquehanna Financial Group shows chip delivery times rose to 25.8 weeks last December, the company's longest delivery time since tracking that data in 2017. Among them, the shortage of micro-control unit (MCU) chips required for automobiles is the most prominent.
A survey conducted at the end of the year by the Ifo Institute of Economics in Germany also showed that nearly 70% of the companies surveyed complained about bottlenecks in the procurement of raw materials and intermediate materials, and nearly 90% of the auto companies surveyed also expressed this view.
According to the German Federal Statistical Office, the output value of German manufacturing has dropped sharply due to the above reasons. In November, German industrial output was still 7% below pre-pandemic levels. In contrast, France's industrial output fell by only 5% compared with pre-pandemic levels in the month, while Italy's industrial output rose slightly. In 2021, domestic production in the German automotive industry fell 12% year-on-year to 3.1 million units, more than 50% lower than the level in 2019.
Katharina Utermöhl, senior economist at Allianz Insurance Group, said Germany's private consumption was not strong enough, another factor affecting Germany's economic growth. According to the German Trade Association, sales at retailers across Germany fell by 37% during the Christmas period 2021 compared to 2019.
A recent report released by the Hans Berkeler Foundation of the German Trade Union Confederation said that although Germany's private wealth ranks first in Europe overall, the gap between rich and poor is large, which drags down the consumption of the country's residents. Nearly one-fifth of full-time workers in Germany now earn less than two-thirds of the country's average monthly salary, or 2,284 euros.
Utmore also said people are cautious about consumption because they are pessimistic about the economic outlook. According to data from German market research firm Gefco, the German consumer confidence index has fallen to negative 1.6 points in December last year.
Whether the German economy can recover in 2022
This week, the International Monetary Fund cut its 2022 German economic growth forecast from 4.6% to 3.8%, which is lower than the eurozone economic growth. The agency said the reason for the downward revision of the forecast is that supply bottlenecks will still hinder the recovery of the German economy.
The german federal ministry of economy and climate protection released a report on the 26th that Germany's gross domestic product (GDP) is expected to grow by 3.6% in 2022. The report expects Germany's economic recovery to accelerate this year, the labor market to continue to improve and the unemployment rate to fall by 0.6 percentage points to 5.1 percent.
In 2022, will the German economy remain in a long-term downturn, or will it recover? Economists surveyed by the British media in recent days have not reached a consensus on this issue. Economists say the key to determining the problem is how long the supply bottleneck will last, which will determine whether downstream manufacturers have access to upstream materials ranging from semiconductors to lithium batteries.
Data from market research firm IHS Markit showed Germany's manufacturing sector at 60.5 in January, the highest level since September last year. This means that German industry is gradually recovering, and supply chain problems are showing initial signs of easing, the agency said.
At the same time, the problem of sea freight rates has also been alleviated. As of the 26th, the Baltic Dry Bulk Index has been lowered to 1296.00, which is nearly 40% of the price index in December last year.
However, Joachim Lang, head of the German Confederation of Industries, said that the current Global Outbreak of the Olmikron strain is likely to be a factor affecting the global supply chain in the future, which will make factories in Europe, Asia and other regions close again.
According to data from the Robert Koch Institute, a German disease control agency, as of the 27th, the country had 203,000 new confirmed cases of new coronavirus compared with the previous day, and the number of new confirmed cases in a single day exceeded 200,000 for the first time. The country's 7-day COVID-19 infection rate (the number of new confirmed cases in 7 days per 100,000 people) rose to 1,017.4, breaking through 1,000 for the first time.
Carsten Brzeski, chief economist of the Dutch International Group, believes that once the supply bottleneck is alleviated and the quarantine restrictions of the epidemic are lifted, the German economy will enter a fast recovery channel.
"This year, the German federal government plans to take on nearly 100 billion euros of net new debt, and the 7.4 billion euros of financial assistance distributed to Germany in the 'recovery fund' will also land, which may take Germany from one extreme to the other: from recession to growth champion." He said.