How significant is shaking off recession by Germany?

Threat of recession in 2023 was lurking and then came the news that Germany is showing signs of shaking off recession. This is not an insignificant development because Germany is the largest economy in Europe. In May 2023 factory orders in Germany rebounded. This is telltale sign that Germany has shaken off recession. Increase in demand was 6.4% from April against 1% increase predicted by economists in a survey conducted by Bloomberg.

In this rebound of sorts most significant increases were seen at manufacturers of vehicles of all types. In the category called “other transport equipment” orders increased by whopping 137%. This category includes everything from ships to military material.

This is good news not only for German economy but also world economy as Germany is one of the economic behemoths of the world. After dragging the economy into second quarter of negative output earlier this year German businesses were showing persistent signs of struggle. In such a scenario news of rebound is heartening.

Despite green shoots overall outlook of German economy is not bright. As per a survey published on Wednesday, expectations of carmakers are lowest since 2008 economic crisis. A report published earlier in the week provided evidence that business prospects of machinery companies don’t seem to be improving.

Opinion of Joerg Zeuner about German economy

“The industrial downturn is still being offset by solid demand in the services sector,” Joerg Zeuner, chief economist of Union Investment in Frankfurt, stated in a report. “Even if the situation in manufacturing gives little cause for celebration, the German economy is currently more likely to stagnate than shrink.”

Factory orders in Germany have been suffering on account of poor demand in China, second-biggest economy after USA. China after months of contraction in manufacturing, is itself losing momentum. There is not much likelihood of things getting better for the country’s manufacturing businesses any time soon, with tighter monetary policy expected to weigh on economic growth. Meanwhile Rhine River’s sinking water level is raising serious concerns about a supply crunch.

While Germany is the motor of Europe’s economy, there’s a mixed picture elsewhere across the region’s industrial landscape. A purchasing managers’ index in Italy this week suggested manufacturing had its worst month since the height of pandemic lockdowns in early 2020.

By contrast, data on Wednesday showed factory output in France surged in May to the highest level in three years. Spanish production also increased.

German industrial data releasing on Friday might point to ongoing weakness. According to economists’ estimates, output perhaps stalled in May. Although Germany is motor of Europe’s economy still mixed signals are coming from industrial landscape of the region. Data shows that factory output in France surged in May while according to a purchasing manager’s index this week, manufacturing in Italy had its worst month since 2020 pandemic lockdowns.

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