German Economy Stuck in Crisis
“The German economy is stuck in crisis,” says Klaus Wohlrabe, Head of Surveys at ifo, commenting on the report by the Federal Statistical Office that economic output in the second quarter of 2024 fell by 0.1 percent. “Hardly any improvement is to be expected in the third quarter of 2024 either,” Wohlrabe continues. “That is indicated by the results of the ifo Business Climate Index in July.”
The turnaround is still a long time coming, particularly in industry. The energy-intensive industries have been able to expand their production somewhat since the start of the year. In the rest of the manufacturing sector, economic output is stagnating. Overall, the order backlogs are continuing to dwindle, and the industry is lacking new orders. In July, the assessment of the current situation fell to its lowest level since September 2020, and business expectations for the coming months have clouded over considerably.
Recovery in private consumption is also sluggish. According to the ifo economic surveys, the Euro 2024 in June is likely to have provided a temporary increase in sales, particularly in the hospitality industry. In addition, car sales in June were surprisingly positive. Overall, however, the business climate for consumer-related service providers and the retail sector deteriorated further in July. As a result, private consumption is also likely to increase only slightly in the third quarter.
