Germany is still not recovering and could already be in a slight recession, the Bundesbank said in its monthly report for September on Thursday. However, economists at the German central bank hope that this will not be a “significant, broad and lasting decline in economic performance.” However, they stressed that the German economy remains in a weak phase and in “difficult waters.”
Thus, they reaffirm that it is very likely that in the third quarter the GDP of the European locomotive “will stagnate or decrease a little more”. Given the surprising figure of a contraction of 0.1% in the first three months of the year, it can be said that the country is touching the recession, since two consecutive quarters of GDP decline are enough to achieve this.
Bundesbank experts point out in the text that German production started the third quarter with very weak data, both in the construction sector and in the manufacturing industry. Weak domestic demand This has dragged down the industry, despite its good performance in the eurozone. At the same time, uncertainty surrounding economic policies has made investments more cautious.
The ZEW investor confidence index was released on Tuesday and was quite disappointing, coming in at its lowest level since October 2023, at 3.6 points, down from 19.2 points in August.
In this sense, the largest European economy continues to receive bad news. Added to the problems of Volkswagen and BMW is the recent announcement by Intel of the shutdown of the factory they wanted to build in Magdeburg to manufacture electronic chips, with an investment of 30 billion euros, of which 10 billion would be borne by the State.
Another stick in the wheel of the German economy is that private consumption has not rebounded, despite the fact that the labor market is following a stable trend, with the number of unemployed barely increasing during August in a rather weak economic period. At the same time, wages have increased beyond inflation, but consumption has remained subdued.
The silver lining is that this job stability and increased purchasing power “must be reflected in consumption in the future,” the Bundesbank said.
The entity’s president, Joachim Nagel, assured the IMF on Wednesday that the little hope there was for a recovery in the second half of the year “has diminished considerably” and that the caution of German consumers “is proving stubborn.”
Faced with this panorama, and with the forecasts of decline of the main economic institutes of the country, the leader predicted that it is possible that an economic stagnation “will occur throughout the year 2024.”
The Bundesbank will revise its forecasts again in December, although it expects inflation to remain “at low levels”, as it did in August. but it would bounce back again towards the end of the year due to rising energy prices. The Bundesbank predicted in June that GDP growth would end this year at 0.3%.
At the beginning of the year, the German government already revised down its growth forecast for this year, to 0.2%, from 1.3% expected in October 2023.
