Germany’s economy is intensifying its downward slide

BERLIN. Even in the third quarter, the German economy did not come out of the doldrums. The purchasing managers’ index for the entire private sector fell surprisingly sharply by 2.3 to 48.3 points in July. This was announced by the financial service provider S&P Global, which carries out the survey monthly. Economists had only expected a drop from 50.6 to 50.3 points.

The number 50 is the limit for growth and shrinkage. If the economic barometer is above that, this indicates an impending upswing, and below that it indicates a downturn. The index is now falling well below this mark, even though Germany is in a recession anyway. In the last quarter of 2022 and the first of 2023, the economy had shrunk.

German economy will remain in recession

The purchasing managers’ index has now fallen below the 50-point mark for the first time since January. It’s the third straight decline and the worst reading in eight months. As recently as May, Chancellor Olaf Scholz (SPD) had promised that the “green transformation” would trigger an “economic miracle”. Instead, the prospects are clouding over.

“The probability that the economy will find itself in a recession in the second half of the year has increased,” said the chief economist at Hamburg Commercial Bank, Cyrus de la Rubia. His money house is sponsoring the survey. “This is a bad start to the third quarter for the German economy.”

Export economy falls to Corona level

Above all, the export economy is suffering. For these companies, the purchasing managers’ index fell to its lowest level in more than three years. Back then, in May 2020, the corona measures had paralyzed the economy worldwide.

Since Germany is the largest economy in the EU, the German low also has an impact on the entire European Union. “The European Central Bank will have to significantly lower its optimistic growth forecast for the second half of the year,” said Commerzbank chief economist Jörg Krämer. (fh)