Reichstag rainy day
A rainy day at the Reichstag. Photo: David Cohen @ Unsplash
Data released today revealed that in August, Germany saw its industrial orders fall slightly further than expected as a result of less demand domestically, adding to the signs that the continued slump in manufacturing is pushing Europe's largest economy to recession.
The Economy Minister said that contracts for German-made goods fell from 0.6% from July and that the demand for capital goods was down 1.6%.
“The German economy is in the midst of a recession. Today’s data make that clear again,” said Thomas Gitzel, economist at VP Bank Group. “The German government will probably come under growing pressure to give up its strict budget policy.”
Last week, Finance Minister and Vice Chancellor Olaf Scholz said that Germany could cope with an economic crisis and that he did not expect any downturn to be as severe as it was in 2008/09.
The government is continuing with its balanced-budget policy, despite increasing pressure from economists and other governments to increase spending in order to boost flagging demand.
Manufacturers in Germany, heavily reliant on exports, are suffering from a combination of a slowing global economy, and continued business uncertainty linked to trade dispute between the US and China, as well as the UK's impending, albeit delayed, exit from the European Union.
Adding to the general sense of foreboding regarding the German manufacturing sector, a survey released last week showed that factories across the country had recorded their weakest performance in September since the financial crisis of 2008.
Germany's economy shrank by 0.1% in Q2 and data points to continued manufacturing weakening in Q3.
A technical recession, as defined by economists, is a minimum of two consecutive quarters of contraction, although that does not necessarily mean that annual growth rates will turn negative.
Also last week, several leading economic institutions in Germany cut their growth forecasts for the remainder of 2019 and 2020, putting the blame on weaker global demand for manufactured goods and uncertainty connected to trade disputes.
Back to Homepage