Germany’s economy is facing increasing concerns of a winter recession as factory activity sharply declined in November. This worsening trend adds to the ongoing manufacturing crisis in the country.
Factory Orders Drop Sharply
Germany’s new factory orders fell by 5.4% between October and November, losing over €50 million. This follows a smaller 1.5% drop in October. November’s decline marks the sharpest fall since August 2024.
A dramatic 58.4% decline in orders for aircraft, trains, and ships contributed to this sharp drop. Orders from outside the eurozone also fell significantly, and demand within the eurozone dropped by 3.8%.
Key sectors, including basic metals (-1.2%) and pharmaceuticals (-7.2%), saw notable declines. Both consumer and capital goods also weakened. However, some sectors showed growth. Orders in the chemical industry rose by 1.7%, while machinery orders increased by 1.2%. Domestic demand grew by 3.8%, and overall orders from September to November were 1.7% higher than the previous three months.
Rising Recession Risks
Germany’s economy continues to struggle with weak consumer sentiment and lower demand, making a winter recession increasingly likely. The next two GDP reports will be crucial in deciding whether Germany officially enters a recession.
Retail sales data further highlights the recession risk. In November, retail sales dropped by 0.6%, following a 0.4% decline in October. This also missed the expected 0.5% growth. Non-food retail sales fell by 1.8%, while mail order and e-commerce sales dropped by 1.2%. However, food sector sales grew slightly by 0.1%. Year-on-year retail sales grew by 2.5%, slightly above the 2.4% increase in October and ahead of the 1.9% market forecast.
No Immediate Recovery
Economist Carsten Brzeski from ING noted, “There’s still no trend reversal for Germany’s industry. It’s bottoming out at best.” He added that disappointing retail sales suggest the rebound in private consumption seen in the third quarter may not continue into the fourth quarter.
Brzeski also warned that, unless Christmas shopping provides a boost, private consumption could drop further. Along with political uncertainty and rising inflation, the chances for a recovery in consumption seem slim.
Germany’s economic performance will be under close watch as it faces persistent challenges in manufacturing and consumer demand.