German economy’s decline worsens, but Bundesbank sees no recession ahead.
The German economy has experienced an unexpected acceleration in its downturn, according to the August purchasing managers’ index for the private sector. The index, which tracks both industry and services, fell to 48.5 points, marking a five-month low and moving further away from the growth threshold of 50 points. Economists had anticipated a slight increase to 49.2 from July’s 49.1, but the index fell short of expectations.
Chief economist Cyrus de la Rubia of Hamburg Commercial Bank described the figures as disastrous, indicating a deepening recession in the German industrial sector with no recovery in sight. The industrial barometer dropped to 42.1 points from 43.2 in July, suggesting a sharper contraction than anticipated. While the services sector remains in the growth zone, its expansion has slowed, with the barometer falling to 51.4 from 52.5 in July.
Despite the economic downturn in the spring, the Bundesbank does not foresee a recession for Germany. The central bank expects the gross domestic product (GDP) to show slight growth in the third quarter of the year, following a 0.1% decline from April to June due to decreased investment. Although two consecutive quarters of decline typically indicate a technical recession, the Bundesbank believes consumer spending could help drive economic recovery.
