Germany's economic outlook has worsened, with recent Purchasing Executive Index (PMI) data showing continued weakness in both the manufacturing and service sectors. According to experts, the German economy, which has been dragged into an even deeper contraction, does not expect a recovery until the end of the year.
S&A P Global's HCOB (Hamburg Commercial Bank) Purchasing Executive Index (PMI) data for September has been released.
According to the data, the composite PMI in Germany, which was 48.4 points in August, fell to 47.2 points in September. Thus, Germany compound PMI data, which was below 50 points, fell to the lowest level in the last 7 months.
The service sector PMI, which was 51.2 points in August, fell to 50.6 ⁇ in September to the lowest level in the last 6 months. Manufacturing PMI fell from 42.4 in August to 40.3 in September.
PMI data shows growth above 50 points and contraction below.
The manufacturing and service sectors account for more than 3 ⁇ 2 ⁇ of the German economy.
In the statement, ⁇ The German economy is being dragged into an even deeper contraction led by the manufacturing sector. ⁇
HCOB Chief Economist Cyrus de la Rubia, in his assessment of the data, ⁇ The decline in the manufacturing sector has deepened again, evaporating the hope of an early recovery in the German economy. While production experienced the fastest decline in the last year, new orders also decreased. ⁇
De la Rubia, who stated that companies in Germany have produced staff at an unprecedented rate since the Covid-19 pandemic in 2020, noted that this corresponds to a period when many major automotive suppliers announced significant employment reductions, and that these disturbing figures ⁇ will increase the risk of deindustrialization in Germany and the ongoing debate about what the government should do about it.
De la Rubia, optimism is a thing of the past. Producers are downright depressed about their future activities and their expectations for the coming year are declining. Moderate optimism in August changed dramatically to the harshest pessimism in a year in September. This rapid decline in sentiment is likely linked to a wave of negative news headlines surrounding Volkswagen ⁇ and casting a shadow over the industry as a whole. ⁇
Stating that these alarming trends in manufacturing are also starting to affect Germany's traditionally strong service sector, De la Rubia warned that the growth in the activities of the service sector has slowed for 4 consecutive months and is heading towards a recession.
German economy at risk of recession
The German economy is struggling to grow amid rising interest rates and cyclical winds and structural changes. The economy shrank 0.1 percent in the second quarter due to declining investments.
The Central Bank of Germany expects lower growth in the 3rd quarter, while the Institute for Economic Research (Ifo), one of Germany's leading economic think-tanks, considers a further decline in GDP possible in the 3rd quarter.
The German economy will be in a technical recession if it shrinks in the third quarter. The technical recession is expressed as a reduction in GDP for 2 consecutive quarters. Germany experienced a recession in 2020, the first year of the pandemic after 10 years of good economic growth, for the first time since 2009.
The German government expects the economy to grow by 0.3% this year.
On September 5, Ifo cut the country's growth forecast for 2024 and next year from 0.4 percent to zero due to poor investment and order status.
On the other hand, while the rising interest rates against the rising inflation in the Eurozone after the Russia-Ukraine War curbs the desire of German companies to invest, the fact that many countries, especially China and Turkey, are increasingly producing the goods imported from Germany, makes it difficult for Europe's largest economy to move away from the recession.
In Germany, where structural problems also curb the economy, it is stated that the business model titled ⁇ Import cheap energy and intermediate goods, process them and export them expensively with the perception of ⁇ Made in Germany ⁇ as high quality goods, which was once quite successful, no longer works.
In addition, the availability of cheap subcontractors in Eastern Europe, China's ever-increasing exports and the USA's construction of the country's defense do not help the country.
While many recent crises such as the Covid-19 pandemic, supply chain disruptions and the Russia-Ukraine War have exposed the weaknesses of the German economy, it is also noteworthy that the country faces some problems in overcoming geopolitical problems, climate change, stagnant economy and demographic difficulties. Germany is still crushed under its own bureaucracy, rules and procedures.
Meanwhile, German industry is increasingly weakening, Chinese companies are technologically catching up, and even Far Eastern companies are outpacing Germans in renewable energy and automotive.
Source of: bigpara.hurriyet.com.tr
