Anyone who believes that the economic situation of a country can best be described using bare numbers is currently being put to the test almost every day. On Friday, for example, the Federal Statistical Office reported that incoming orders in German industry had skyrocketed by more than six percent in June, as in the previous month. There was talk of a “bang” and some economists have already asked whether all the recession talk of the past few months was “just a bad dream”.
On Monday, the same office presented figures again – and thoroughly destroyed the euphoria: German companies may have received a surprising number of orders in June. At the same time, however, they curbed their production more than even the pessimists among the experts had expected.
If you take industry, construction and energy together, emissions fell by a significant 1.5 percent compared to May. It was the second decline in a row. Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank, spoke of “persistent lethargy”, his Commerzbank colleague Jörg Krämer predicted a further contraction of the economy for the second half of the year. Gross domestic product had already stagnated or even shown a slight minus in the past three quarters.
The DIHK warns that there is no improvement in sight
Industry alone produced 1.3 percent less in June than in the previous month. The construction industry, which is suffering from high interest rates and a slump in orders, even reported a 2.8 percent drop in production. Only the energy suppliers bucked the trend and posted a small plus of 0.6 percent. “High energy prices, rising interest rates, a shortage of skilled workers coupled with a sluggish global economy continue to slow down industry,” said Jupp Zenzen, economic expert at the German Chamber of Industry and Commerce. There is no improvement in sight.
In view of the murky data, the political debate is also becoming increasingly heated. The CDU/CSU demanded the implementation of a five-point emergency program which, among other things, provides for a reduction in electricity tax and charges for the use of the electricity grid, as well as a moratorium on bureaucracy requirements for companies. In addition, the two opposition parties want to improve the conditions for tax depreciation and lower the real estate transfer tax. There are also calls for an investment program from the traffic light coalition.
Several renowned economists, on the other hand, warned against actionism. Sebastian Dullien, head of the Institute for Macroeconomics and Business Cycle Research (IMK) in Düsseldorf, explained that there are two problems that politicians must primarily address: the great uncertainty among companies about the future development of energy prices, which is preventing investments, and the inflation-related reluctance to buy on the part of many citizens.
The problem of weak consumption could even solve itself with falling inflation
“In order to solve these problems, it makes no sense to launch a classic economic stimulus program, nor does it help if everyone comes around the corner with their well-known favorite proposals for tax cuts or additional spending,” Dullien told the Süddeutsche Zeitung. “What we need is clarity about how much electricity and gas will cost in 2030 and what a reliable bridge that politicians can build for companies until then can look like Being able to deduct investment costs immediately or over a very short period of time. That would help companies a lot without costing the state a lot in the long run.”
In the opinion of the IMK director, the problem of weak consumption will solve itself step by step if the inflation rate continues to fall and the comparatively high wage agreements of the past few months make themselves felt more clearly in people’s wallets. “However, the state should refrain from anything that makes citizens even more insecure. The most recent savings decisions, such as parental allowance and student loans, may not be that serious on their own, but they ensure that high earners and students can spend less money,” stressed Dullien.
The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, also warned the government against giving in to calls for an economic stimulus package with further subsidies and tax cuts. “An economic stimulus package that merely gives billions more to the powerful corporate lobby would be counterproductive, would lead to deadweight gains and would not change the economic problems,” he said. Germany does not have an economic but a structural problem. What is important, according to Fratzscher, is “a long-term transformation program with an investment offensive, a broad-based debureaucratization and a strengthening of the social systems”.