Despite isolated bright spots
Economic traffic light is on “acute danger of recession”
08/15/2023 09:26 am
The German economy continues to face strong headwinds. According to the IMK, higher financing costs are curbing companies’ willingness to invest. The fear of a recession has therefore not yet been banished.
According to the IMK Institute, which is close to the trade unions, there is still a high risk of recession for the German economy, despite isolated glimpses of economic light. For August to the end of October, the probability of this is estimated at 71.5 percent, according to the economic barometer of the Institute for Macroeconomics and Business Cycle Research (IMK).
In July, the recession risk for the following three months was estimated at 78.5 percent higher. However, according to the institute, the economic traffic light still signals an “acute risk of recession”. “Various headwinds are still slowing down the German economy,” said IMK economics expert Thomas Theobald. Private consumption will be adversely affected by inflation, which remains high, although it is now declining. In addition, business investment and residential construction suffered from higher financing costs. The economic weakness in the production of energy-intensive branches of industry is particularly pronounced.
There have been small glimmers of hope recently, according to Theobald. The expert referred to the increasing production at service providers and the orders from the manufacturing industry from abroad. However, the development of incoming orders has so far been characterized by large orders, which often reflect one-off orders. They are therefore only of limited significance for the basic economic dynamics. This positive development therefore initially had little impact on the three-month forecast for the economic indicator.
Even the federal government does not yet see an upswing coming up. According to the latest monthly report from the Ministry of Economic Affairs, the still weak external economic conditions are dampening production and export development. The German gross domestic product stagnated in spring after two consecutive quarters of shrinking economic output. Leading indicators such as the Ifo business climate are not signaling any sustained economic recovery.