A winter recession could be on the cards for Germany as factory activity levels slumped in November, according to data released on Wednesday by the Federal Statistical Office.
Germany could experience a winter recession, as disappointing factory activity levels in November deepened its ongoing manufacturing crisis.
New orders across Europe’s biggest economy fell by 5.4% between October and November with the steep decline amounting to a loss worth more than €50m. This was worse than the previous month’s 1.5% fall, while also being the steepest drop since August 2024.
November’s figure was mainly pulled down by a 58.4% plunge in aircraft, train and ship orders, which was a sharp reversal from the robust order levels seen in October.
Foreign demand from outside the eurozone was also considerably dampened, with demand from within the eurozone also falling -3.8%.
Factory orders also declined -1.2% for basic metals, along with -7.2% for pharmaceuticals. Similarly, both consumer and capital goods saw weaker factory output.
On the other hand, orders inched up 1.7% for the chemical industry, with machinery orders also rising 1.2%. Domestic order also increased by 3.8%, with orders from September to November also being 1.7% higher than in the previous three months.
Could Germany face a winter recession?
Germany’s economy has continued to struggle significantly in the last several months, with dampened demand and weak consumer sentiment considerably hampering growth.
As such, the possibility of a winter recession has become even more pronounced lately, however, the country’s next two gross domestic product (GDP) reports will be crucial in determining whether it will officially be in recession. Germany’s next GDP figures are due to be released on 15 January.
The country’s lacklustre retail sales could also exacerbate the risk of a winter recession. Month-on-month retail sales for November came in at -0.6%, down from October’s -0.4%, according to the Federal Statistical Office. This also missed analyst expectations of a 0.5% growth.
Non-food retail sales dropped -1.8% in November, with mail order and e-commerce retail sales falling -1.2%. However, retail sales in the food sector inched up 0.1%.
On the other hand, year-on-year retail sales grew 2.5% in November, ahead of October’s 2.4%, as well as market expectations of 1.9%.
Carsten Brzeski, an ING economist, said as reported by The Telegraph: “There is still no trend reversal in sight for the German industry. It’s bottoming out at best. At the same time, disappointing retail sales suggest that the rebound in private consumption in the third quarter is unlikely to continue in the fourth quarter.
“Unless Christmas shopping brings a positive surprise, private consumption is set to drop and ongoing political and policy uncertainty combined with re-accelerating inflation make any substantial rebound in consumption unlikely.”
Source: Euro News
