German economic outlook remains bleak: statistics

BERLIN -- The latest economic barometer fell to 83.4 points in August, marking a nearly four-point decline from July and moving further away from the neutral 100-point mark that measures average economic growth, the Institute for Economic Research (DIW Berlin) said on Wednesday.

The latest indicators, complied regularly by DIW Berlin to assess the current economic trend in Germany, suggest that German economic outlook for the third quarter remains bleak, with little to no expected increase in economic output.

"The bumpy global economic development, continues to slow the German export economy, which in turn makes companies hesitant to invest," said Geraldine Dany-Knedlik, head of the Forecasting and Economic Policy Department at DIW Berlin,

Despite an initiated interest rate turnaround, interest rates remain high. "Only private consumption might contribute somewhat to stabilizing economic output this quarter, thanks to stable inflation rates and continued rising incomes," Dany-Knedlik added.

The German industrial sector remains under significant pressure, with production stagnating at a low level. According to ifo economic surveys, industrial companies have barely increased production this quarter, with shrinking order backlogs and a deteriorating business climate in the manufacturing sector for the third consecutive month.

"The German industrial economy is still not doing well," noted Laura Pagenhardt, a DIW economic expert. "Companies in Germany are currently unable to benefit from the European Central Bank's interest rate turnaround; demand is stagnating, and investment remains weak."

The services sector, while performing better than industry, also saw a decline in sentiment in August, particularly regarding future business expectations. Despite stable inflation and rising incomes, stagnating economic development is dampening consumer confidence. Many households are opting to save rather than spend, leading to a contraction in private consumption in the second quarter.

The labor market is also feeling the strain of the weak economy, with seasonally adjusted unemployment rising and the number of job vacancies falling. Overall, employment growth is slowing, further complicating the economic situation in Germany.