The German economy was characterised by economic stagnation throughout 2023, accompanied by high, albeit declining, inflation rates. The main reason for this weaker development than generally expected at the start of the year was the after-effects of the massive loss of purchasing power in the wake of the energy price crisis, which weakened private consumption. Added to this is the significantly lower growth momentum of the global economy and the dampening effects of geopolitical tensions and crises.
Following the 0.1 per cent decline in price, seasonally and calendar-adjusted gross domestic product (GDP) in the third quarter, a further slight decline in GDP is also likely for the year-end quarter in view of the current monthly indicators such as incoming orders and industrial production. In particular, the positive investment trend seen until recently is likely to weaken in light of the weaker order situation, less favourable financing conditions and the special development in the third quarter following the expiry of the "environmental bonus". At the same time, the latest consumer-related indicators such as sales in the retail and hospitality sectors suggest that private consumption will stabilise, albeit at a low level.
The latest sentiment indicators such as the ifo Business Climate Index, the ZEW Economic Sentiment Index and the Purchasing Managers' Index (PMI) for industry in Germany suggest that entrepreneurs are somewhat more optimistic about the future at the end of the year. Private households also appear somewhat more optimistic in the wake of falling inflation rates and rising real incomes, which is reflected in the GfK consumer climate in an increased propensity to buy and declining savings intentions - albeit starting from a very low level. Nevertheless, the risks regarding the expected economic recovery remain high in view of the weak global economy, the ongoing geopolitical crises and the associated possible commodity price spikes. The fiscal implications resulting from the Federal Constitutional Court's ruling of 15 November 2023 on the second supplementary budget for 2021 and the uncertainties surrounding the structure of public budgets also represent a burden for the economic outlook.
Global economy continues to tread water
The weak phase of the global industrial economy continues. Against the backdrop of less favourable financing conditions and weak global demand, industrial production expanded only slightly in September compared to the previous month, at +0.2%. The global purchasing managers' indices were below the growth threshold in many important German sales markets in November (e.g. in the eurozone and Eastern Europe). The S&P Global sentiment indicator rose slightly in November and, at 50.4 points, is only just above the growth threshold again. Sentiment recently improved both in the manufacturing sector (from 48.8 to 49.3 points) and among service providers (from 50.4 to 50.6 points). Overall, however, global economic growth prospects remain subdued.
Although global trade increased slightly in September compared to the previous month (+0.7%), the RWI/ISL Container Throughput Index (seasonally adjusted) fell again slightly in October (from 125.5 to 125.0 points). While container throughput in Chinese ports provided support, the North Range Index for European ports fell slightly. In addition, the Kiel Trade Indicator for the reporting month of November currently points to a further decline in global trade of -0.9%. This means that the global economy is unlikely to provide much impetus for German foreign trade in the short term.
International organisations also expect only a modest recovery in the further course of the year. In its November forecast, the OECD only expects real global trade to increase by +1.1% in 2023 and +2.7% in 2024. Below-average expansion rates are also expected for global GDP (2023: +2.9%, 2024: +2.7%), not least due to weakening growth in the USA (2023: +2.4%, 2024: +1.5%) and China (2023: +5.2%, 2024: +4.7%). According to the OECD forecast, after a weak year in 2023 (+0.6%), the eurozone should see a slight upturn again (2024: +0.9%) with further declining inflation, rising real incomes and a stabilisation of the industrial economy.