Germany is facing the potential of a winter recession as factory activity fell in November, giving Chancellor Olaf Scholz a blow ahead of next month’s general election.
According to the Federal Statistical Office, new orders in Germany declined by 5.4 percent between October and November, led by a sharp drop in orders for more than €50 million (£42 million).
The newest numbers also revealed a 1.7 percent reduction in orders year on year, implying that demand for German produced goods has fallen by more than 8 percent since 2020.
German retail sales also fell by 0.6pc in November, signalling that Germany’s high-saving households will not rescue the economy with a consumer spending binge.
Carsten Brzeski, an economist at ING, said the latest numbers “confirm our view of a light winter recession in Germany”.
He said: “There is still no trend reversal in sight for the German industry. It’s bottoming out at best. At the same time, disappointing retail sales suggest that the rebound in private consumption in the third quarter is unlikely to continue in the fourth quarter.
“Unless Christmas shopping brings a positive surprise, private consumption is set to drop and ongoing political and policy uncertainty combined with re-accelerating inflation make any substantial rebound in consumption unlikely.”
The economy has been pummeled by a combination of lower demand from China, an energy crisis, and a crippled auto industry grappling with the transition to electric vehicles.
All of this has increased the pressure on Mr Scholz, who is anticipated to lose the election on February 23.
According to Jane Foley of Rabobank, the current drop in demand is “a stark reminder of the headwinds facing Europe’s largest economy”.
She pointed out: “German GDP data are due next week and these are likely to ensure that economic stagnation provides the backdrop to next month’s national election.”
The malaise in Germany is already spreading through much of the Continent.
The European Commission’s economic sentiment indicator, based on surveys across the eurozone, showed a fresh slump in confidence in Germany, France and Italy last month, taking the overall tracker to its lowest level in more than a year.
Sentiment among manufacturers was particularly impacted, underlining the scale of the crunch in the eurozone’s industrial sector.
Elias Hilmer, of Capital Economics, said the figures show that the entire eurozone economy was “stagnating” at the end of 2024.
