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The downward correction of the GDP was indicated because according to the first flash estimate by the statisticians, very bad data from industry were reported for March. The production of industry remained 3.4 percent below February. Incoming orders fell by 10.7 percent compared to the previous year. The industry’s backlog of orders is shrinking. The location and prospects in the building are particularly poor. Building permits in March were down 30 percent year-on-year.
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The mood in the German export industry has also deteriorated. In April, German companies exported 5.7 percent less to non-EU countries. The China business shrank by almost ten percent. The Ifo export expectations fell to plus 1.8 points in May. This is the lowest value since November. “The global interest rate hikes are slowly having an impact on demand,” says Ifo researcher Klaus Wohlrabe, head of the institute’s surveys. “The German export economy lacks dynamism.”
Important leading indicators for the economy in the next six months also tipped over. The Ifo business climate deteriorated in May for the first time in six months – unexpectedly sharply from 93.4 to 91.7 points. The main reason for this was the significantly lower expectations of the 9,000 companies surveyed. “The German economy is looking forward to the summer with concern,” said Ifo President Clemens Fuest.
The ZEW economic expectations based on surveys of financial experts also deteriorated significantly again in May. “One reason for the decline in the mood indicator is the expectation of an even stronger interest rate hike by the ECB,” commented ZEW President Achim Wambach.
On the mood presses the stubborn Inflation. In Germany it fell slightly to 7.2 percent in April. That’s still a high level. The decline since October’s peak of 8.8 percent is slower than expected. After all, prices at upstream economic levels such as importers, manufacturers and wholesalers have risen much more slowly and are falling in some cases. Nevertheless, the European Central Bank (ECB) is likely to raise interest rates again in June. It is aiming for an inflation rate of two percent. Bundesbank President Joachim Nagel considers “several interest rate steps” and then a long phase of high interest rates to be necessary.
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The German gross domestic product shrank by 0.3 percent in the first quarter. The Federal Statistical Office corrected its first estimate slightly downwards on Thursday.
Germany is now officially in a recession. Because economic output had already declined in the fourth quarter of 2022.
The prospects for the summer have also deteriorated significantly. Recently, alarmingly bad data has come from companies.
The German economy has slipped into a recession after all. The Gross domestic product (GDP) declined 0.3 percent in the first quarter. The Federal Statistical Office lowered its initial estimate of 0.0 percent on Thursday. In the previous quarter, GDP had already fallen by 0.4 percent. If economic output falls for two quarters in a row, economists speak of a technical recession.
This has dashed hopes that Germany could survive the consequences of the Ukraine war, such as the price shocks for energy and food, without a recession. The decline in economic output is only slight and the labor market in Germany is still robust. What is more important, however, is that the prospects for the economy have recently deteriorated significantly. The outlook for the coming months is also gloomy.
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The downward correction of the GDP was indicated because according to the first flash estimate by the statisticians, very bad data from industry were reported for March. The production of industry remained 3.4 percent below February. Incoming orders fell by 10.7 percent compared to the previous year. The industry’s backlog of orders is shrinking. The location and prospects in the building are particularly poor. Building permits in March were down 30 percent year-on-year.
read too
The mood in the German export industry has also deteriorated. In April, German companies exported 5.7 percent less to non-EU countries. The China business shrank by almost ten percent. The Ifo export expectations fell to plus 1.8 points in May. This is the lowest value since November. “The global interest rate hikes are slowly having an impact on demand,” says Ifo researcher Klaus Wohlrabe, head of the institute’s surveys. “The German export economy lacks dynamism.”
Important leading indicators for the economy in the next six months also tipped over. The Ifo business climate deteriorated in May for the first time in six months – unexpectedly sharply from 93.4 to 91.7 points. The main reason for this was the significantly lower expectations of the 9,000 companies surveyed. “The German economy is looking forward to the summer with concern,” said Ifo President Clemens Fuest.
The ZEW economic expectations based on surveys of financial experts also deteriorated significantly again in May. “One reason for the decline in the mood indicator is the expectation of an even stronger interest rate hike by the ECB,” commented ZEW President Achim Wambach.
On the mood presses the stubborn Inflation. In Germany it fell slightly to 7.2 percent in April. That’s still a high level. The decline since October’s peak of 8.8 percent is slower than expected. After all, prices at upstream economic levels such as importers, manufacturers and wholesalers have risen much more slowly and are falling in some cases. Nevertheless, the European Central Bank (ECB) is likely to raise interest rates again in June. It is aiming for an inflation rate of two percent. Bundesbank President Joachim Nagel considers “several interest rate steps” and then a long phase of high interest rates to be necessary.
read too