German economy revives, Volkswagen ends short-time work

LONDON (ICIS)–Germany’s economy is beginning to pick up after the coronavirus lockdowns and restrictions, with quarter on quarter GDP growth projected at 6.9% and 3.8% for Q3 and Q4, respectively, according to Munich-based research group Ifo.

Automotive major Volkswagen (VW), the largest producer in Europe, has discontinued short-time work at eight plants in Germany, effective 1 July.

Short-time work (Kurzarbeit in German) is the state-regulated system of work-sharing unemployment insurance in which employees agree to or are forced to accept a reduction in working time and pay.

At the peak of the pandemic in May, around 15% of chemicals workers were in shot-time work.

The relatively high growth rates published this week would come after the low production of goods and services during the pandemic-related shutdowns in Q2.

However, for the full year GDP in Europe’s largest economy is expected down 6.7% from 2019, Ifo said.

Ifo expects the recovery to continue next year, with 2021 GDP growth projected at 6.4%.

RETAIL SALES
Also, German retail sales recovered in May, making up for the losses suffered in April and March, the country’s federal statistical agency reported on Thursday.

Retail sales jumped 13.9% from April, and they were up 3.8% year on year from May 2019, according to preliminary data by Wiesbaden-based Statistisches Bundesamt.

VW ENDS SHORT-TIME WORK
Apart from the eight plants it announced on this week, VW had already discontinued short-time work at two other plants earlier.

VW had initiated short-time work in Germany in March when it shut down plants as demand collapsed amid the pandemic.

VW added that it remains “extremely difficult” to predict further developments, and the company would “keep a close eye on the situation in order to react in line with demand.”

Capacity deployment at VW’s plants in Germany is currently at between 75-95%, compared with production levels before the beginning of the coronavirus pandemic, it said.

In related news, VW decided not to proceed with plans for a new auto plant in Turkey, because of weak global auto demand in the wake of the pandemic, German state media group ARD reported, citing a VW spokesperson.

The automotive industry is a major global consumer of petrochemicals which make up more than one-third of the raw material cost of an average vehicle.

Several chemicals have a significant percentage of their demand tied to the global auto industry. They include nylon resins, styrene butadiene rubber (SBR), polypropylene (PP), acrylonitrile-butadiene-styrene (ABS), polymethyl methacrylate (PMMA), and polycarbonate (PC).

Front page picture: A VW plant in Zwickau
Source: Action Press/Shutterstock 

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