Recession Fears in Germany Grow as Economic Woes Deepen
Germany's industrial sector continued to contract for the fourth straight month in August, hinting at persistent pressure and raising recession fears.
According to the latest report from the Federal Statistics Office, industrial production fell by 0.2%, slightly more than the predicted 0.1% decline.
Although this may seem concerning, Franziska Palmas from Capital Economics noted that the decline was influenced by volatile factors, softening its impact.
Despite this, expectations remain pessimistic, with high interest rates and declining demand likely to lead to further contractions in German industrial output in the upcoming months. This bleak outlook hints at a potential technical recession, marked by two consecutive GDP contractions in the third and fourth quarters of the year.
July’s production data was also revised, showing a 0.6% decline month-on-month instead of the provisional 0.8% drop. A more stable three-month comparison revealed a 1.9% production decrease between June and August 2023 compared to the prior three months.
The data unveiled specific sectors that weighed down industrial production in August, including a 2.4% slump in construction, a 6.6% decline in energy production, and a 2.3% decrease in machinery and equipment manufacturing. However, the automotive industry posted a positive 7.6% increase in production.
Excluding energy and construction, industrial production showed a 0.5% rise in August compared to July. Despite a 3.9% increase in industrial orders in August, the sector’s future remains challenging, as suggested by Destatis.
Germany’s manufacturing sector, a significant part of its economy, remains mired in a downturn. The HCOB final Purchasing Managers’ Index (PMI) for manufacturing in September stood at 39.6, well below the critical 50 threshold that distinguishes growth from contraction.