German economy is slumping on anti-virus curbs, Bundesbank says
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[March 22, 2021]
FRANKFURT (Reuters) - The German
economy is likely to shrink sharply this quarter as pandemic-fighting
curbs hit the services sector and even the booming construction industry
slows, the Bundesbank said on Monday.
In its latest monthly report, the German central bank seemed to abandon
its expectations of a rebound in the spring and dropped references to
the vaccination campaign, which has been plagued by delivery delays and
news reports of possible side-effects, as a catalyst.
"The measures to contain the pandemic are more stringent on average in
the current quarter than in the previous one," the Bundesbank said.
"Therefore, the economic output in the first quarter of 2021 is likely
to decline sharply ... particularly in the contact-intensive service
sectors."
It added that an increase in sales tax, which had been temporarily cut
last year, had probably contributed to a substantial decline in
construction in January.
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Picture shows the abandoned Kennedy Square due to the coronavirus
disease (COVID-19) pandemic lockdown in downtown Essen, Germany,
March 11, 2021. REUTERS/Wolfgang Rattay
Industrial production also eased in the first month of the year but
order intake was strong and exports of goods increased, the
Bundesbank added.
Exports of goods to Britain were the exception, however, falling by
almost a quarter in January, the first month after it left the
European Union single market.
The Bundesbank had said in last month's report that the economy
would recover in the spring as coronavirus infections fell and
vaccines were distributed.
(Reporting By Francesco Canepa; Editing by Kevin Liffey)
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