The world economy is weakening, there is a lack of material, prices are rising: In July, German industry received fewer orders for the sixth month in a row due to numerous problems. The orders were due to falling demand from the domestic market and from the euro countries by 1.1 percent lower than in June, as reported by the Federal Statistical Office. The numbers were even worse than expected by economists, who had expected an average of minus 0.5 percent. Compared to the previous year, orders were 13.6 percent below the level of July 2021.
Neither the federal government nor the economy expect a change for the better in the near future, on the contrary: According to economists, Europe’s largest economy is heading for a recession. “Due to the war and the high gas prices, the development of demand in the manufacturing sector was also weak at the beginning of the third quarter,” said the Ministry of Economic Affairs. “For industrial companies, the outlook for the second half of the year remains subdued, which is also reflected in a cooled business climate and cautious export expectations.” The Association of German Chambers of Industry and Commerce (DIHK) also expects a permanent slump: “Supply chain disruptions, rising energy prices and high inflation rates have put a damper on the global economy and have also caused orders to fall from month to month since the beginning of the year,” said DIHK economic expert Jupp Zenzen. “These are not good prospects for the export-oriented German economy.”
Domestic orders fell by 4.5 percent in July. In contrast, orders from abroad increased by 1.3 percent. While demand from the euro zone collapsed by 6.4 percent, new business with the rest of the world increased by 6.5 percent. “The fact that the minus comes exclusively from within Germany fits into the picture, after all there is a risk of an energy crisis in Germany in particular,” said Commerzbank chief economist Jörg Krämer. He expects a further decline in gross domestic product from autumn, i.e. a recession.
In the past second quarter it was only enough for a mini-growth of 0.1 percent. Stopping Russian gas supplies makes energy rationing likely, warned VP Bank’s chief economist, Thomas Gitzel. “Even companies that were still in good spirits up until now still get cold feet in such an environment,” he said. The companies are still sitting on a high order backlog, “but the risk of cancellations is growing”.