Business orders are experiencing a significant decline following a previous peak.
Germany, being a prominent industrial nation, is currently facing challenges in its industrial sector. This sector seems to be in a slump as orders decreased by almost six percent in August, impacting significant industries like automotive, chemicals, and machinery. Experts view this as another concerning development.
The industrial sector's new business has experienced a collapse, further aggravating the crisis. Following two consecutive increases, orders dropped by 5.8 percent in August compared to the previous month, marking the sharpest decline since January, according to the Federal Statistical Office. Economists had predicted a decline of only 2.0 percent. However, the revised increase in orders for July was higher than initially reported, at 3.9 percent instead of 2.9 percent.
Domestic orders saw a decrease of 10.9 percent in August, while foreign orders saw a minor decline of 2.2 percent. Orders from Eurozone countries dropped significantly by 10.5 percent, while those from other parts of the world increased by 3.4 percent.
LBBW expert Jens-Oliver Niklasch commented, "The leading indicators are falling, forecasts are being revised downwards, and the bad news just keeps coming. It all feels like a recession." Commerzbank chief economist Jörg Krämer described the data as a disappointing surprise, expecting the gross domestic product to stagnate at best in the second half of the year. "There is no sign of the much-anticipated economic recovery."
August's performance can be attributed to the development of large orders. Without these, orders would have decreased by only 3.4 percent. "However, the hopes that orders may have bottomed out have now been shattered," explained the Federal Ministry of Economics. "Given the persisting weakness in demand and the continuing deterioration in business sentiment, a significant recovery in industrial production in the second half of 2024 seems unlikely."
Sebastian Dullien, the scientific director of the trade union-affiliated IMK Institute, pointed out that the three major sectors of the German industry - automotive, machinery, and chemicals - are all impacted by the downturn. The IMK currently anticipates a stagnant GDP for this year and a meager 0.7 percent growth for the next year. "The current deteriorating situation in the industry poses a downside risk to this already pessimistic forecast," Dullien added, stating that growth rates exceeding one percent, as expected by the federal government for 2025, seem unrealistic given the current data.
The economic downturn in Germany's industrial sector is causing concern, with experts predicting a stagnant GDP for this year. The slump in orders, particularly in the automotive, chemicals, and machinery industries, is significantly affecting the country's economy.
