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Economy

An economy does not grow consistently but rather in cycles, with alternate phases of poor or excessive utilisation of overall economic capacities. The analyses of these cycles and the forecasting of economic turnarounds are of great importance. The economy sets the economic framework within which private households, businesses and the state make decisions on consumption or investments. Monetary and fiscal policies also differ depending on the phase in the economic cycle. KfW Research analyses the economies in Germany and the Euro area and publishes its own quarterly forecasts for real GDP growth.

Media and Comments of the Chief economist Dr Fritzi Köhler-Geib

30.09.2020 | German labour market

“The economic recovery noticeably improved the labour market situation in the summer. The feared rise in unemployment to above the 3 million mark appears to have been averted for the time being. Due to seasonal factors, unemployment should fall by the end of the year. However, we can assume that the number of infections will rise again in the autumn. This could lead to a further slowdown in the economic recovery. Setbacks are also possible if stricter government regulations on social distancing become necessary in Germany and Europe and consumers spend less out of fear of infection. A further slump in economic activity is unlikely, as people in Germany are generally behaving in a disciplined manner and the findings from the spring allow a more regionally targeted approach to the pandemic. Next year, the shortage of skilled workers will become noticeably more important again as a barrier to economic recovery. It is therefore crucial for the further recovery that short-time workers and the unemployed receive training in line with market requirements. Otherwise, there is a risk that qualifications will expire and the unemployed will be demotivated if they remain inactive for a longer period of time. Moreover, the crisis acts as a catalyst that accelerates structural change. The digital and ecological transformation places new demands on employees and companies, far beyond the automotive industry. For this reason, we must take seriously the risk that the underemployment created in the corona crisis could become entrenched without increased qualification and that the shortage of skilled workers could increase."

Previous comments from Dr Fritzi Köhler-Geib

Further comments

German Economy / European Economy

KfW Business Cycle Compass Germany / Eurozone


25 August 2020

A strong recovery so far but headwinds are increasing

The coronavirus pandemic has led to an economic slump of historic proportions in Germany and the euro area. The low point, however, was passed back in April. It was followed by a vigorous catch-up movement that translates into very high growth in the present quarter. However, headwinds are gathering strength.

KfW Research stands by its forecast that Germany’s gross domestic product will contract by around 6% this year, before growing again by 5% next year. Gross domestic product in the euro area is set to contract by around 8% overall in 2020. A severe second wave of infections remains the highest risk, although new restriction measures will likely end up being more targeted than in spring.

Current KfW Business Cycle Compass Germany / Eurozone  (PDF, 111 KB, non-accessible)

KfW-ifo SME Barometer

SMEs play a decisive role for the growth and prosperity of an economy. Using its unique surveys, studies and statistics, KfW Research analyses the needs of SMEs in Germany. The KfW-ifo SME Barometer indicators are based on a scale-of-enterprise evaluation of the ifo economic surveys, from which the well-known ifo business climate index is calculated, among others. Around 9,500 businesses, including around 8,000 SMES, from manufacturing, construction, wholesale, retail and services (excluding lending, insurance and state) are polled monthly regarding their economic situation.


1 October 2020

SME business confidence has risen again

A second wave of new coronavirus infections is on its way in Europe, taking on alarming proportions in some neighbouring countries and jeopardising the economic recovery. Against this backdrop, the fifth rise in the business climate indicator for German SMEs is sending out reassuring signals. Nevertheless, the resurging pandemic is becoming a growing obstacle for the economy as the cold season begins. It can still be overcome but the difficult part of the recovery has begun.

Current KfW-ifo SME Barometer  (PDF, 129 KB, non-accessible)

European Economy


From May 2020 combined with German Economy

KfW Research Business Cycle Clock Eurozone

The KfW Research Business Cycle Clock portrays the current economic trend using the output gap, i.e. the deviation of the actual economic output from the output achieved at normal capacity utilisation in the euro area. This allows for a simple interpretation of current economic data and classification into the four categories of a business cycle: upturn, boom, downturn, recession.

Details on KfW Research Business Cycle Clock  (PDF, 61 KB, non-accessible)

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