There are positive signals from the economy

In Germany, 200,000 fewer people were on short-time work in March than in February. And that’s not the only good news. The industry in particular seems to have got used to the lockdown well.

Hamburg's Köhlbrand Bridge at sunset: In spite of the lockdown, there are positive signals from industry in particular.

Dhe third corona wave is rolling, the state is reporting a record deficit – and short-time working in Germany is declining. What sounds unlikely is actually true if one follows the estimates of the Ifo Institute. In March, the number of Germans on short-time work decreased from 2.9 million in February to 2.7 million, the Munich researchers announced on Wednesday.

This corresponds to 8 percent of employees subject to social security contributions in Germany, previously it was almost 9 percent. “The decline took place in almost all branches of the economy, especially in industry,” said Ifo labor market expert Sebastian Link.

In fact, the export-dependent industry recorded a clear decline in short-time work, the number of employees reduced against state wage compensation fell by 58,000 people (to 436,000, after 494,000 in February). “Since April 2020, the proportion of employees on short-time work has steadily decreased and is below the macroeconomic average,” said the Ifo Institute. Industry is benefiting from the recovery in world trade driven by the world’s two largest economies, America and China.

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Unlike industry, the service sector has had a long dry spell. But there was also positive news from there: In March, the area grew again for the first time in six months. The purchasing managers index climbed by 5.8 to 51.5 points, as the IHS Markit institute announced on Wednesday based on its monthly survey of hundreds of companies. This means that it will not shrink any further, but will grow again slightly – values ​​over 50 on the barometer that is currently being observed on the financial markets stand for expansion.

Markit economist Phil Smith attributed this to the loosening of restrictions on the lockdown on the one hand, but also to the “returned confidence of customers”. Markit chief economist Chris Williamson sums it up: “Led by the rapid growth in production in Germany, the industrial sector boomed and the badly battered service sector stabilized.” The vaccination campaigns have made growth expectations more optimistic than they have been for over three years. According to Williamson, the survey suggests that the economy “has weathered the recent lockdowns far better than many expected”.

The positive development in the service sector is also reflected in the number of short-time workers. According to the Ifo Institute, the proportion of short-time employees in retail is 15.8 percent, more than twice as high as in industry, but the industry recorded the sharpest decline in March. The number of employees on short-time work decreased by almost 100,000 to 718,000.

According to Ifo, retailers (20.2 percent) and car dealerships (11.7 percent) in particular still rely heavily on short-time working, while wholesaling is 10 percent. “The slight easing has also led to a decline in trade and the hospitality industry,” said Link expert. However, the proportion of short-time workers in the hospitality industry is “still very, very high” at 50.8 percent.

Despite the signs of improvement in the situation, the German economy is likely to have contracted in the first quarter. The Bundesbank is putting a question mark behind its economic forecast for 2021 due to the resurgent corona infection and the stricter containment measures. The probability has decreased that the forecast of 3 percent economic growth made in December for the current year will still be achieved, said Bundesbank President Jens Weidmann at the request of the Reuters news agency.