Europe's largest economy seems to have hit the pause button. According to Bloomberg, Germany is experiencing a mild recession. It sounds like a diagnosis that is not too serious but not too promising either. Industrial production growth is expected to remain flat through 2024, disappointing those hoping for a robust recovery. Adding to the gloom, analysts expect gross domestic product to shrink by 0.1% in the third quarter.
Experts attribute Germany’s economic weakness to a range of factors, including a sanctions-related cutoff of Russian natural gas supplies, weak demand from China, headwinds facing the country's auto industry, as well as a shortage of skilled labor. Erik-Jan van Harn, macro strategist at Rabobank, even called Germany’s industrial sector the Achilles' heel of its economy. The once-powerful German industry seems to have lost some steam, now searching for new ways to reignite growth.
Germany's economy ministry is not optimistic either, noting that the country's economic slowdown is likely to persist through the second half of 2024. There is a glimmer of hope, however, as analysts see a slight upturn next year.
Notably, the German government has already downgraded its forecast, now predicting a 0.2% GDP contraction for 2024. A recovery is on the horizon for 2025, but for now, the focus is on weathering the storm with cautious optimism, hoping that the recession will end soon.
