German growth stumbles as people save, not spend

Lockdowns cast a chill over Germany's economy in the first quarter.

New numbers out Tuesday (May 25) show GDP shrank by 1.8% on the previous three months, and 3.1% on the year.

Both figures were worse than economists expected.

The drop came as consumers hoarded their cash.

Household spending dropped by 5.4% on the quarter, while the savings rate rose to a record level.

One economists described the slump in spending as 'colossal'.

And it came even as the government plowed billions of euros into job protection schemes and cash handouts, such as extra child benefits.

Companies also invested less in machinery and equipment over the period, but there were some bright spots in the data too.

Construction activity rose, and so did exports.

Overseas shipments increased 1.8% on the quarter, helped by strong demand from the U.S. and China.

Even so, the latest growth numbers compare badly with the rest of the euro zone, which saw a far smaller contraction.

But economists say progress on lifting lockdowns and tackling the health crisis should see healthier numbers for German over the coming months.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting