GERMANY's DekaBank projects a recession for Europe's most economically powerful country, a period of reduced economic activity that can last for months, reports Radio Deutsche Welle.
For the fifth month in a row, German factories received fewer orders, it noted. In June, orders fell 0.4 per cent compared with May. Though a minor decline at first glance, that adds up to a 5.6 per cent decrease for the second quarter of 2022.
'It is possible that the recession stretches from the fourth quarter of this year into the second quarter of next year,' said Andreas Scheuerle, the head of industry analysis at DekaBank.
Current high inflation rates continue to erode consumer purchasing power, he said. 'People can no longer afford to buy as much as they did before and perhaps no longer want to do so.'
There is also great uncertainty as to what additional costs might arise from the high energy prices caused by the war in Ukraine and the gas levy. A report by the Nuremberg Society for Consumer Research (GfK) found the German buying mood diminished as of the end of July.
Businesses paralysed by fear of gas prices German businesses are less confident about the economy and the prospects of growth. Companies are expecting business to become much more difficult in the coming months, according to the Business Climate report, published by the Ifo Institute for Economic Research.
Said Commerzbank chief economist Jorg Kramer: 'These trends indicate that Germany is facing a 'tangible risk of a recession. After all, Putin keeps playing with the gas tap and fueling the fear of a gas crisis.'
By doing so, Mr Kramer said, the Kremlin wants to demoralise the German public. 'This psychological war over gas is unsettling companies and makes them more cautious when ordering.'
This would gradually use up the large order backlog that had provided a safety cushion for industries over the past two years.
While a recession seems inevitable, he said, it is however, unlikely to be as severe as in 2008 preceded by the bankruptcy of Lehman Brothers, said Mr Kramer.
Said Mr Scheuerle: 'The German economy could shrink by a maximum of 0.4 per cent,' adding that the rebound would not be as strong afterward.
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For the fifth month in a row, German factories received fewer orders, it noted. In June, orders fell 0.4 per cent compared with May. Though a minor decline at first glance, that adds up to a 5.6 per cent decrease for the second quarter of 2022.
'It is possible that the recession stretches from the fourth quarter of this year into the second quarter of next year,' said Andreas Scheuerle, the head of industry analysis at DekaBank.
Current high inflation rates continue to erode consumer purchasing power, he said. 'People can no longer afford to buy as much as they did before and perhaps no longer want to do so.'
There is also great uncertainty as to what additional costs might arise from the high energy prices caused by the war in Ukraine and the gas levy. A report by the Nuremberg Society for Consumer Research (GfK) found the German buying mood diminished as of the end of July.
Businesses paralysed by fear of gas prices German businesses are less confident about the economy and the prospects of growth. Companies are expecting business to become much more difficult in the coming months, according to the Business Climate report, published by the Ifo Institute for Economic Research.
Said Commerzbank chief economist Jorg Kramer: 'These trends indicate that Germany is facing a 'tangible risk of a recession. After all, Putin keeps playing with the gas tap and fueling the fear of a gas crisis.'
By doing so, Mr Kramer said, the Kremlin wants to demoralise the German public. 'This psychological war over gas is unsettling companies and makes them more cautious when ordering.'
This would gradually use up the large order backlog that had provided a safety cushion for industries over the past two years.
While a recession seems inevitable, he said, it is however, unlikely to be as severe as in 2008 preceded by the bankruptcy of Lehman Brothers, said Mr Kramer.
Said Mr Scheuerle: 'The German economy could shrink by a maximum of 0.4 per cent,' adding that the rebound would not be as strong afterward.
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