The economic weakness has been going on for months and there is currently no improvement in sight. Many sectors are showing declines, but one can also draw a positive balance for the first half of the year.
According to the Federal Ministry of Economics, there is currently no improvement in sight in the weakening economy. “Current leading indicators do not yet point to a sustained economic revival in the coming months,” says a statement published in Berlin.
Although private consumption has recently had a stabilizing effect, the “weak external economic conditions” have dampened production and the development of exports.
According to the ministry, industrial production as a whole showed a significant decline of minus 1.3 percent in June, with the auto industry and the construction industry being particularly affected. Although retail sales excluding motor vehicles fell in June compared to the previous month, they grew by 1.3 percent in the second quarter compared to the previous quarter.
According to the information, the number of corporate insolvencies applied for in May was 3.5 percent higher than in April and even 19 percent higher than in May 2022. “Current leading indicators such as incoming orders and the business climate, but also the restrained development of the global economy, do not point to a sustained economic revival in Germany for the time being,” said the ministry.
Increasing exports at machine builders
Germany’s mechanical engineering companies increased their exports in the first half of the year, primarily thanks to strong business in the USA. Exports increased overall compared to the same period last year including price increases (nominal) by 11.5 percent to 104 billion euros, as reported by the VDMA industry association in Frankfurt. However, price-adjusted exports increased by only 3 percent. In addition, momentum weakened in the second quarter. Against the background of falling orders, the VDMA is skeptical about the export prospects.
“In view of double-digit order losses, we have to prepare ourselves for further declining export volumes,” explains VDMA chief economist Ralph Wiechers. “According to the Ifo business survey, the export expectations of machine builders for the next three months are currently at the lowest level since mid-2020.”
In the first half of the year, the export-oriented industrial sector benefited in particular from demand in the USA. The value of exports increased by a nominal 21.6 percent to around 13.8 billion euros. The US economy is proving resilient, says Wiechers. In addition, machines and systems from Europe would also be needed in order to achieve the goals of the Inflation Reduction Act economic development program and the program to promote US chip production.
According to the information, the China business has not really gained momentum after the corona measures were lifted at the end of 2022. In the first six months, German machine exports to China only increased by a nominal 4.4 percent to a total of 9.5 billion euros. A hoped-for significant economic upturn has not materialized so far, says Wiechers.
Things looked much better in the European Union (EU), with machine exports increasing by 10.5 percent to 46.3 billion euros. On the other hand, 51.4 percent fewer machines “Made in Germany” were delivered to Russia, after business collapsed in the previous year as a result of the Russian war of aggression in Ukraine. Russia’s share of total German machine exports is only 0.8 percent, and the trend is falling.
Source: Stern
