By Sergei Manukov
German industrial production fell to a six-month low. Berlin is pessimistic and talks about a long recession.
June was the second consecutive month of the decline in industrial production in Germany. This was, according to Bloomberg, the main reason for the very unconvincing and purely formal exit of Europe's first economy from the winter recession.
In monthly terms, the volume of industrial production in Germany, according to the statistical office Destatis, decreased in June by 1.5%. Economists at Bloomberg had forecast a 0.5% decline. The industrial production index is now the lowest since December 2022.
Analysts attribute the downturn in German export-oriented industry to weak demand in China, growing labor shortages, continued monetary tightening and the lingering effects of last year's energy crisis. The winter recession in Germany was replaced by stagnation in the spring. Not surprisingly, the IMF considers Germany to be the only member of the G7 whose economy is likely to experience a recession by the end of the year.
"The turn around is not yet in sight," Ralf Wichers, the chief economist of the German Mechanical Engineering Association (VDMA), was quoted by Bloomberg as reporting a collapse in new orders in the engineering sector in June on an annualized basis.
Serious problems in production in the first summer month were also seen in two other large economies of the united Europe: France and Spain. Of the four largest economies in the eurozone, only Italy can boast of any economic growth. Moreover, the main driver was the Italian auto industry.
The decline in industrial production in Germany is yet another proof of the deteriorating situation in the economy of the single European currency zone.
Nor are there any signs that the decline in German industrial production is over. Optimists point to a sharp increase in the number of new orders in June, the highest, by the way, over the past three years, but analysts explain it as a simple stabilization after an even larger collapse in March, and not some significant improvement in the situation in the German economy.
The bad news from China does not bode well for German industry. In July, economic activity in the Celestial Empire slowed down noticeably, and it was joined by a decline in production.
There is no particular optimism in Berlin. The government is hinting to voters in every possible way that the problems in the economy will last for years. Now the authorities are advising to increase spending, because, in their opinion, this will mitigate the problems. Nevertheless, the Scholz government is clearly going to return to savings and cutting costs. Approval on August 9 of another €20bn increase in the €200bn fund earmarked for climate change and investment in the semiconductor sector may be the last significant increase in German government spending in the near future.
This article originally appeared in Russian at expert.ru