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Weaker demand pulls down the German economy

Made in Germany

Industrial orders in Germany declined in July due to a fall in demand abroad. This could result in a recession in the German economy in the coming quarter, which is already struggling.

Europe’s largest economy relies heavily on exports which have been affected badly by the dampening businesses in the global economy due to various factors. These include the harsh trade policies imposed by US President Donal Trump and the uncertainty surrounding Brexit.

Data that was released on Thursday showed that the “Made in Germany” goods received 2.7 percent lower contracts in July as compared to the previous month. The economy ministry informed that it was due to a significant decline in orders received from non-euro zone nations.

Thomas Gitzel, VP Bank analyst, said in a statement the downturn in the manufacturing sector of the German economy poses a risk of recession. The orders received from non-euro zone nations dropped by 7 percent in July.

The gross domestic product for the country was 0.1 percent lower in the second quarter of the year. This was due to lower sales abroad amidst Brexit and low demand from China. The ministry predicts that the future of the manufacturing industry is not pleasant, at least in the upcoming quarter. It added that the ongoing trade war and generally lower business expectations in the manufacturing sector are prime causes of less hope for the industry.

The DIHK business association of Germany claims that the flow of investments has reduced because of uncertain business expectations and slow global trade.

On the other hand, ING’s Carsten Brzeski believes that the plight of the manufacturing industry in Germany was not solely because of the downturn in the global economy. He noted that domestic orders have reduced by a higher rate as compared to foreign orders. Concluding that the problems in the global economy have penetrated the domestic economy as well.

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