The economy in Germany is cooling off. According to the economists, a mild recession can no longer be prevented. But when exactly is she coming? And what do other institutes and research facilities say?
Inflation, war in Ukraine and energy crisis: The German economy has been under pressure from several sides for months. It is all the more astonishing that the economy has so far been robust. But does it stay that way?
The economic experts presented their annual report in Berlin on Wednesday – traditionally it is one of the most important dates for economists in autumn. The main question was how Germany can deal with the current crises. The experts forecast little good for the German economy: for the coming year they expect a decline in economic output of 0.2 percent. For energy-intensive industries in particular, it will soon no longer be worth investing in Germany – there is even a threat of de-industrialization, according to the experts.
But how do other institutes and research facilities see it? What is the current state of the German economy and how will it develop in the coming year? So-called early indicators offer answers. The business magazine “Capital” took a look at five relevant indices:
In the financial market survey by the Leibniz Center for European Economic Research (ZEW), 350 financial experts from banks, insurance companies and industrial groups are asked each month how they assess important international financial market data.
According to the latest results from October 21, the economic outlook has deteriorated again. Although the economic expectations for the next six months have improved somewhat – they are now at -59.2 (-2.7) out of a maximum of -100 points – the current situation of -72.2 (-11.7) is supported by the Experts classified as almost dramatic. The sum of the situation and expectations is therefore -131.4 points.
This value was only lower between November 1992 and February 1993, the ZEW researchers explain. At that time, the real gross domestic product fell by one percent. During the 2009 financial crisis, when the German economy collapsed by 5.7 percent, the indicator was at -109.7 points.
The extent of the impending recession cannot therefore be deduced – but a trend can be determined as to whether a recession is approaching. An economic slump in GDP always followed when the ZEW index fell below -90 points. “The currently available value of minus 131.4 points is therefore a very clear indication of a recession,” explains the ZEW.
Commerzbank’s leading indicator recently fell from 0.71 to 0.5 points. According to Commerzbank, which published the indicator on October 12, this was the sharpest drop in 11 years. Reasons are the weaker world economy, rising interest rates and the falling purchasing manager index between the USA and Europe.
The increasing trade between Europe and China could only partially compensate for the decline. Overall, however, the “Early Bird” is still at a fairly high level, explains Commerzbank.
Without war, inflation and the energy crisis, the indicator would point to a weakening of the economy, but by no means to a recession. Under the given circumstances, however, Commerzbank expects a forthcoming recession in the winter months.
The Institute for Economic Research regularly surveys over 9,000 companies on how they assess their current situation and business expectations for the next six months. In October, the respondents stated here, similar to the ZEW, that the current situation was difficult. The outlook has improved, however, although this is marked with clear question marks.
Overall, the index fell from 84.4 points in September to 84.3 points in October – in each case compared with the average for 2015. The manufacturing and construction sectors in particular are groaning under the economic situation. Although the order books are still full, fewer and fewer new orders are currently being received. Capacity utilization in the manufacturing sector has already fallen to 84.6 percent and the indicator for the main construction trades has fallen to its lowest level since January 2016. The Ifo economy is accordingly red.
Especially in the USA, but also in Europe, the job market has overheated after the corona restrictions. Now, however, in times of high inflation and rising interest rates, there are increasing signs that the boom could be coming to an end. In the USA, the number of vacancies in September fell more than at any time since the Corona outbreak in February 2020. The situation is similar in the euro zone, where the willingness to “buy” staff measured in the purchasing managers’ index has fallen to an 18-month low. And in Great Britain, the expected unemployment rate for 2023 was recently raised from 4.1 to 4.5 percent.
For Germany, economists assume that the unemployment rate could rise by 0.6 points to 5.5 percent in the coming year. However, data from the job portals Stepstone and Indeed have so far shown a less dramatic picture: the decline in vacancies is real, but small and at a very high level. Indeed, February 1, 2020 is currently used as the reference value, i.e. the last time measured before Corona. Compared to that day, the number of vacancies today is 53.7 percent higher. At the absolute peak in early summer 2022, the value was almost 60 percent. The situation is similar at Stepstone. Another important indicator is the number of open HR positions. The idea behind it: Anyone who strengthens their HR department is obviously planning new hires. There, too, a similar development can be seen as in the overall context: “Recently, the vacancies have decreased somewhat, but we are still at a very high level,” explains Indeed spokesman Felix Altmann.
The purchasing managers’ index for the private sector – industry and service providers together – also fell in October, from 45.7 to 44.1 points. It is thus at its lowest value since the beginning of the Corona crisis in early 2020. The financial service provider S
But there is also a ray of hope: “Despite the slowdown in growth and the decidedly bleak business outlook, the level of employment has not yet fallen, which indicates the resilience of the German labor market,” said S
This article first appeared on Capital.de
