German economy takes a hit. Fears rise as negative data suggests 2024 recession
German experts had earlier forecast an uplift in the Ifo index, with economists projecting a figure at the 87.8-point mark. This slump in figures is closely tied to Friday's grim findings regarding the economic climate. In December, the Manufacturing PMI Index fell to 43.1 points, signaling a bleak decline from November's 42.6 points and again missing the target forecasts of 43.4 points. The Services PMI Index also took a hit, scraping a meager 48.4 points, showing an apparent dip compared to November's 49.6. The experts had anticipated a figure edging closer to the threshold delineating recessionary from normal economic conditions, a predicted figure of 49.8 points.
New Data Shows German Economy in Recession
Given these numbers, it's unsurprising that economists are drawing parallels between Friday's dismal numbers and those released on Monday. "After Friday's downturn in PMIs, today's Ifo data further fuels the disappointing trend. The Ifo confirms that the German economy is plunging into a recession (characterized as a crisis), negatively impacting all principal sectors. As reported previously, Germany is wrapping up 2023 on a demoralizing note, with orders dwindling and both the manufacturing and service sectors languishing in a "recessionary area," as per the December PMI survey commissioned by S&P Global. The survey suggests both production and service-based companies along the Oder River are currently witnessing an accelerated decline in activity," - this comment was reported by Peako Bank.
German specialists and media outlets are also weighing in on the numbers, an air of pessimism pervading their commentary. The Ifo Indicator fell in December, curtailing three consecutive months of growth. This trend is particularly significant, as noted by Clemens Fuest, president of the Ifo, as reported by Businessinsider.de.
"The economy perseveres in a state of weakness even through the holiday period," stressed Fuest. In his view, the glimmering ray of hope for a mild recovery in 2024 is rapidly dimming.
Government economist Jörg Angelé at Bantleon, assesses that recent budget decisions by the government could potentially extend the recessionary phase.
German Construction Industry is Steadily Declining Alongside Other Sectors
Indicators of economic downturns are all too prevalent. The construction industry reported the worst business climate index since September 2005, with half of the companies anticipating additional downsides. Moreover, the issued permits for new apartment construction plummeted by 27 percent compared to the previous year, further casting shadows over future sector performance.
Industries heavily reliant on energy are struggling as they grapple with diminishing orders. Pessimism also reigns in the services sector where expectations have taken a sharp nosedive. The retail sector too, took a hit amidst a subdued holiday trading performance.
The IMK Institute analysts predict a further GDP decline of 0.3 percent in 2024. Deutsche Bank has previously downgraded its projections for the German economy as well, with their experts projecting a contraction of Germany's GDP by 0.5 percent in 2023. The nation is thus braced for worsening economic conditions, a degradation from the earlier forecast of a 0.3 percent dip. Deutsche Bank's prospects for 2024 remain equally bleak.
