Germany is facing a more severe economic slowdown than initially anticipated. Recent forecasts for German GDP indicate a significant decline, exceeding 1%. These statements come directly from Cyrus de la Rubia, the Chief Economist of Hcob. Contrary to initial hopes, the services sector does not seem capable of sustaining the German economy. This situation has had a direct impact on the euro, which has lost 0.2% against the dollar, now trading at 1.082. Simultaneously, Eurozone government bonds have seen a significant increase.
Supporting this, the German manufacturing sector’s Purchasing Managers’ Index (PMI) has recorded growth, reaching 39.1 points in August, while the services PMI has experienced a decline, standing at 47.3. The composite PMI, representing a weighted average between the two, hit its lowest level in over three years, dropping to 44.7.
S&P Global has noted that the German economy suffered its worst decline in over three years in August. Cyrus de la Rubia has emphasized that the services sector is entering a recessionary phase, similar to the manufacturing sector. The current GDP forecast indicates a decline of nearly 1% for the German economy. De la Rubia also mentioned stagflation, a situation where price increases occur alongside economic growth stagnation.
However, not everything is negative. De la Rubia expressed optimism regarding the manufacturing sector, suggesting that there may be light at the end of the tunnel and that the industrial recession may reach its peak.
Finally, the impact of the PMI indices on the euro is evident. The euro has suffered an impact, while bonds have gained momentum due to the unexpected slowdown in the services sector. What will happen in the coming months? It is difficult to say, but everything indicates that Germany will experience a particularly delicate period. To which it can certainly react in the best possible way.