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Industry is holding back the German economy

2023-08-08 19:02:00, Ekonomi CNA

German companies cut their output unexpectedly much in June. Industry, construction and energy suppliers together produced 1.5 percent less than a month ago, the Federal Statistics Office announced on Monday (07.08.2023). Economists polled by the Reuters news agency had expected a minus of only 0.5 percent. In May there was a decrease of 0.1 percent. "The bad mood among companies shows a continued lethargy," said chief economist Alexander Krüger of Hauck Aufhäuser Lampe Privatbank.

"The most that can be expected in the current quarter is a small increase in production." Commerzbank Chief Economist Jörg Krämer explains: "The German economy will also contract in the second half of the year."

Industry is holding back the German economy

Industry produced about 1.3 percent less in June than a month earlier. "Despite the recent increase in demands, the outlook for industrial activity remains gloomy, because it was greatly affected by the lack of large orders", the Ministry of Economy commented on the latest developments. "Due to the smaller business and export expectations of companies , a visible recovery is not yet on the horizon."

Germany is in economic decline

Commerzbank specialist Krämer pointed out: "The minus in June gives a preliminary signal for the weak production figures that will appear in the coming months." Because the order trend has been declining for some time. "In addition, according to surveys, companies have already processed the orders left over from the time of Corona".

The battered industry has recovered a bit recently after surprisingly large orders - partly due to large orders from the aerospace industry. In June, orders rose 7.0 percent from the previous month, the largest increase in three years. In May there was an extremely high increase of 6.2 percent, while now the increase is even greater.

Industry is holding back the German economy

However, key indicators such as the Ifo business climate show that the German economy, which used to grow for years, is still in decline. The construction industry - which is suffering from high interest rates and a drop in new construction orders - reported a 2.8 percent drop in output in June. On the other hand, energy suppliers produced 0.6 percent more than a month ago.

Consulting firm Sentix's monthly barometer of eurozone stockbrokers' economic expectations was slightly better in August, after three declines. On the other hand, the index for Germany fell for the fourth consecutive month and is now at its lowest value since October 2022. "The largest economy is turning into the sick man of the Eurozone and becoming a burden on the region." explained Sentix. The economy here seems to be at a complete standstill at the moment./ DW