The economic prospects in Germany are not rosy. Industry is weakening and private consumption is unlikely to provide any growth impulses for the time being. There is great uncertainty among companies and citizens.
There are increasing signs of crisis in the German economy. The industry is recording significantly less new business and a greater decline in orders than expected. And hardly any growth impulses can currently be expected from private consumption. The mood in retail and among consumers has deteriorated further. Economics Minister Robert Habeck called the economic situation unsatisfactory.
In the industrial sector, after two increases in a row, incoming orders unexpectedly fell significantly in August. The number of orders fell by 5.8 percent month-on-month, as the Federal Statistical Office in Wiesbaden announced. If the large orders are taken out, the companies received 3.4 percent fewer orders.
However, the order intake in the previous month of July was revised upwards. It rose by 3.9 percent month-on-month, after only an increase of 2.9 percent had previously been reported.
Analysts had expected a decline in new orders following increases in June and July. On average, however, they had only assumed a decline of 2.0 percent month-on-month.
Falling revenues in the auto industry
The weak sales of German car manufacturers had an impact on the industry’s sales in the first half of the year. According to the Federal Statistical Office, revenues in Germany’s most important industrial sector fell by 4.7 percent to 269.5 billion euros compared to the same period last year in nominal terms, i.e. not adjusted for price effects. In the same period last year, car manufacturers posted record sales of 282.6 billion euros in nominal terms, partly due to increased prices.
Business climate index for retail is falling
According to the Ifo Institute, the mood in German retail has continued to deteriorate. According to the September survey by Munich economists, car and furniture dealers in particular see their business situation as unfavorable. The business climate index for retail as a whole fell from minus 23.1 points in August to minus 25.6, as the Ifo Institute announced.
“Consumers are uncertain about the economic policy environment,” said economist Patrick Höppner. “This means that no dynamic development in private consumer spending can be expected for the rest of 2024.” Accordingly, the monthly survey suggests that retail prices will not rise too much in the coming months.
Retail Association: Consumer sentiment continues downward trend
The retail association HDE points out that the downward trend in consumer sentiment that has been ongoing for months continued in October. The current consumption barometer has declined for the fourth month in a row. Private consumption is unlikely to provide any growth stimulus in the final months of the year.
Since consumers’ propensity to buy is increasing compared to the previous month, the German Trade Association (HDE) is of the opinion that a minimal increase in consumption can be expected in the coming weeks and months. At the same time, however, consumers planned to intensify their savings efforts.
Federal government corrects growth forecast downwards
Habeck said in Berlin that an impulse for investment would help in the short term. This is exactly what the federal government is planning with the “growth initiative”. The most important thing would be to release the brakes now. Data is constantly being corrected – “unfortunately now downwards”. The Green politician confirmed that the federal government is lowering its economic forecast.
The traffic light coalition also expects economic performance to decline this year, as the “Süddeutsche Zeitung” reports. Habeck had originally expected a slight increase in gross domestic product of 0.3 percent for 2024 – now a decline of 0.2 percent is expected. Habeck wants to present the new forecast on Wednesday in Berlin.
Study: Unemployment will rise in all federal states
According to a forecast, the development will also have consequences for the labor market. Unemployment will therefore increase in all federal states in the coming year. In eastern Germany, the unemployment rate is expected to rise by 0.2 percentage points to 7.6 percent in 2025, and in western Germany by 0.1 percentage points to 5.7 percent, according to the study by the Institute for Labor Market and Occupational Research (IAB) in Nuremberg. Employment will therefore grow by 0.6 percent in the west and will stagnate in eastern Germany. The economic environment remains uncertain, said IAB expert Rüdiger Wapler. “A faster recovery in consumption and stronger foreign trade are likely to have positive effects. If trade conflicts escalate or geopolitical tensions continue to increase, developments in the regional labor markets could deteriorate.”
Source: Stern
