Wachstumskurve mit Kugelschreiber symbolisiert die wirtschaftliche Lage.

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  • The German economy is only emerging slowly from the setbacks caused by the energy price shock, the tighter monetary policy and the global economic softening. This is delaying the generally expected economic recovery. The third quarter is expected to see another slight fall in gross domestic product.
  • Industrial output rose slightly between July and August (+0.5%), although both the construction sector (-2.4%) and the energy sector (-6.6%) registered significant declines. The order reserves in the manufacturing sector expanded by 3.9%. The renewed rise in demand and a cautious stabilisation of some indicators of sentiment suggest that industrial output is bottoming out and could pick up speed again at the turn of the year.
  • Real retail turnover (excluding cars) dropped by 1.2% between July and August, but at the same time the new registrations of cars by private individuals rose clearly, by 12.1%. Overall, the retail turnover including cars – an important component of consumer spending – was probably up in real terms.
  • The rate of inflation fell substantially to 4.5% in September, mainly due to a base effect resulting from the end in September 2022 of the 9-euro public transport ticket and of the tax cut for motor fuel. In view of the declining price pressures at the upstream levels of the economy, the coming months are expected to see a further slow fall-off in inflation.
  • The cyclical weakness has meant that the autumn uptick on the labour market has been small. Seasonally adjusted unemployment rose by 10,000 people in September. The leading indicators of the Institute for Labour Market Research and ifo deteriorated significantly. The labour market is not expected to see a recovery until the economy picks up speed in the coming spring.
  • Indicators of sentiment (business expectations, purchasing managers index) suggest that the Germany economy could have bottomed out in the third quarter, and will likely pick up speed again around the turn of the year.


The German economy continued to experience a weak period in the third quarter: industrial output was pointing downwards against the backdrop of the global economic slowdown and declining exports. Latest figures show that output in the construction sector, following the positive development at the beginning of the year due to the weather, has seen a clear slump in the wake of the dramatic rise in material and financing costs. Also, on the domestic front, consumer spending was slowed by the persistent – albeit clearly diminishing – losses of purchasing power and the increasing impact of monetary policy tightening. Against this background, current leading indicators suggest that there will be a renewed slight fall in Germany’s gross domestic product in the third quarter.

However, the latest indicators of sentiment like the purchasing managers index, the ifo assessments of the current situation, and the ZEW Indicators of Economic Sentiment suggest – albeit starting from a low level – that the rate of the cyclical decline has slowed, and that a moderate recovery is likely to set in at the turn of 2023/24. This assessment, which is reflected in the recently published autumn projection of the Federal Government, is confirmed by the economic research institutes in their latest joint diagnosis. Growth is likely to be stimulated primarily by consumer spending: inflation-related losses of purchasing power in private households will increasingly be offset and, coupled with clearly rising wages and a generally robust employment situation, will help to stimulate consumer spending. Investment in machinery and equipment is also likely to pick up further speed, not least against the background of the high need for investment in the wake of the transition to a climate-neutral economy, whilst investment in construction will probably continue to fall for a while due to the appreciable rise in the level of interest rates.

Despite the current cyclical weakness, the labour market has remained robust. Demand for labour remains high in view of the shortage of skilled workers and of workers in general. Given the economic weakness, companies were recently more reluctant to take on new staff, but this is likely to reverse when the expected economic recovery takes place.


Global industrial output did fall a little between June and July (-0.1%), and world trade was also down again (-0.6%). The leading indicators point to a restrained development in world trade. The RWI/ISL Container Throughput Index did rise somewhat in August (seasonally adjusted) from 123.4 to 124.7 points, and this was said to be largely due to container throughput in Chinese ports. But the Nordrange Index, which reflects trade activity in the northern eurozone, saw a significant fall (107.8 to 103.1 points). According to shipping movement data of the Kiel Trade Indicator (KTI), world trade expanded slightly in September. The KTI currently shows another slight expansion in October, but the prospects for the world economy are still weak, according to the S&P Global indicator of sentiment. The index fell again in September (to 50.5 points), but remained just over the growth threshold. The mood in the manufacturing sector was flat, remaining below the 50 point mark. It saw a renewed slight fall amongst service providers (from 51.1 to 50.8).

In general, global economic dynamism – and thus demand for products from Germany – is likely to see only a restrained expansion in the coming months, because the global industrial economy remains weak, and a restrictive monetary policy is slowing demand. In the coming year, the economic research institutes expect to see a gradual recovery in Germany’s key trading partners, especially in the EU and in central and eastern European countries, which have become even more significant for German foreign trade in the last few years. China is expected to deliver a smaller stimulus than in the past, whilst the U.S. economy is proving robust and the probability of a soft landing in the wake of the falling inflation rate has increased.


Nominal exports of goods and services saw another fall between July and August after adjustment for seasonal factors and calendar irregularities (-2.6%; July: -2.6%). This means that they are 4.5% lower than the average from the second quarter. Nominal imports of goods and services continued their downward trend in August (-1.3%; July: -1.9%). They were 3.7% down on the second quarter. As exports fell more sharply than imports, the monthly trade surplus fell from €13.6 billion in July to €11.4 billion in August.

The foreign trade prices are still being affected by the high price rises for imports last year caused by the war in Ukraine. Import prices fell considerably, by 16.4%, from August 2022. In the monthly comparison, in contrast, they did rise a little for the first time since August 2022 (+0.4%), mainly due to the rises in prices of imported energy. In contrast, export prices only rose by 0.1%, so that the terms of trade deteriorated somewhat, down -0.3% compared with the preceding month. In real terms, the decline both in exports and imports is therefore likely to have been rather more pronounced.

The leading indicators have not been sending out much in the way of positive signals for the development of exports: the ifo export expectations have been clearly negative since June and deteriorated further in September (from -6.6% to -11.3 points). Regarding German exports (in real terms), the Kiel Trade Indicator is showing a fall for September following a surprisingly high rise in August. The latest data on the development of foreign trade and the current indicators reflect the global economic weakness, and do not suggest that there will be any tangible stimulus from foreign trade in the coming months.


Manufacturing output in August saw the fourth successive drop compared with the preceding month, falling by -0.2%. At the same time, the industrial sector registered slight growth of 0.5%, whilst there were appreciable declines both in the construction sector (-2.4%) and in the field of energy (-6.6%).

Economic development varied across the industrial sectors. The important sector of vehicles and vehicle parts recorded a clear increase of 7.6% this time, but this followed on from significant falls in the two preceding months. The two smaller sectors of furniture (+11.5%) and textiles (+6.4%) saw clear increases. In contrast, mechanical engineering reduced its output by 2.3% from the preceding month’s level. The particularly energy-intensive sectors of industry registered overall growth of 0.9%. Here, the manufacture of chemical products expanded (+1.8%), as was also the case with metal production and processing (+1.8%), the manufacture of coke oven products and oil processing (+7.1%). On the other hand, the production of paper and cardboard dropped by 0.7%.

New orders in the manufacturing sector rose by 3.9% between July and August, after they had slumped in July partly due to a special effect relating to large orders (-11.3%). The latest figures show that domestic orders and order from abroad increased at roughly the same rate (+4.0% and +3.9% respectively). In contrast to the preceding months, in which large orders resulted in significant fluctuations, orders excluding large orders also rose by 3.9%. A recovery in new orders was seen particularly in the field of computer and optical equipment (+37.9%). Orders of electrical equipment (+8.7%), pharmaceutical products (+4.0%) and chemical products (+1.7%) also rose. However, some sectors saw declining orders, e.g. key sectors like cars and car parts (-0.7%) and metal production (-2.0%). Demand was flat in the mechanical engineering sector (±0.0%).

The cyclical situation in the industrial sector has firmed up to some extent according to the latest figures. Industrial output rose slightly in August, but the more meaningful two-month comparison still shows a fall of 1.7%. The renewed rise in new orders and the stabilisation of some indicators of sentiment suggest however that industrial output may have bottomed out and should pick up speed again at the turn of the year.


Real retail sales excluding motor vehicles fell by 1.2% in August compared with the previous month, after having been flat in July. Turnover was also down in the multi-month comparisons. Compared with the same month a year ago, the retail sector experienced a real sales decline of -2.3%, which is especially due to the high price increases. Trade in foodstuffs fell by 1.2% in real terms in August compared with July (+1.5% in year-on-year terms). Mainly due to the sharp rise in food prices, this segment of the retail sector has recorded year-on-year sales declines for more than two years, though these have flattened out recently. Food continues to be a strong driver of consumer prices, even though food price inflation has continued to slow compared to the same month a year ago (September: +7.5%, August: +9.0%). Online and mail-order trade shrank by 8.7% in August (-1.9% down against the same month of the previous year).

New car registrations by private individuals fell slightly in September (-0.4%), after rising sharply by +12.1% in August. This means that, in real terms, retail turnover (incl. cars) may have been better than in the narrower definition. In the case of overall new car registrations, the rise (August: +23.7%) and fall (September: -20.2%) were even greater. One reason for this was probably that people brought forward their purchases due to the end of the funding scheme for purchases of electric vehicles for commercial purposes at the end of August.

Leading indicators of consumer sentiment are continuing to send restrained signals: according to the GfK forecast, consumer sentiment again darkened to some extent in October. It is true that cyclical and income expectations picked up in September, but the propensity to save also increased clearly. All in all, consumer sentiment has stabilised at a low level – with slight monthly fluctuations – following a period of recovery in the 2022/2023 winter half-year. The ifo retail business climate deteriorated for the fifth time in September and remains negative, although business expectations improved somewhat in September for the second successive month. Overall, the most recent leading indicators point to an initially restrained development in consumer spending. Given rising wages and falling inflation rates, however, consumer spending is expected to bounce back.


The rate of inflation, i.e. the rise in the price level within the space of a year, is predicted to have stood at 4.5% in September. That is the lowest figure since February 2022, prior to the outbreak of the war in Ukraine, and is largely due to a base effect (9-euro public transport ticket and discount for motor fuel). In August, the rate was still up at 6.1%. The core rate (excluding energy and food) was 4.6% in September (August: +5.5%), and was actually higher than the inflation rate. Year-on-year, food prices again rose at a disproportionately high rate (+7.5%) in September, although inflation also continued to ease here too (August: +9.0%). The rise in energy prices, in contrast, was well below the inflation rate in September, at +1.0% in year-on-year terms (August: +8.3%). The main reason for this is a base effect following the expiry of the motor fuel discount in September 2022. In the field of services, another base effect made itself felt due to the end of the 9-euro public transport ticket. As a consequence, the rise in the price of services also weakened appreciably in September, at +4.0% (August: +5.1%).

On the spot markets, prices for natural gas have been rising again since mid-July. Currently, the TTF Base Load stands at €39/MWh, 81% down on the level of August 2022. However, market expectations suggest that natural gas prices could rise again to around €50/MWh in the coming quarters. The futures prices are not likely to settle back at pre-crisis levels until 2027. The upstream stages of the economy are also seeing less price pressure.

Producer prices fell significantly in August 2023, and were down by -12.6% from August 2022 (July: -6.0%). That was the sharpest drop in producer prices since statistics began in 1949, and is due to a base effect resulting from the high price level last year. In the wake of the war in Ukraine, producer prices had seen a record rise in August 2022 (+46% over August 2021). Producer prices rose by +0.3% from the preceding month’s level. Import prices fell in August by -16.4% in year-on-year terms, the greatest drop since November 1986 (+0.4% compared with July). Wholesale selling prices did rise between July and August (+0.2%), but dropped by -2.7% in year-on-year terms. As is expected by companies, the upward pressure on prices is likely to remain higher in the coming months, but will gradually slow down. The price pressure resulting from past cost increases and supply chain disruptions has largely been passed on. Energy prices are at a moderate level. Monetary tightening is having a dampening effect on the demand side. Against this background, the current forecast by the Federal Government for the inflation rate in 2023 is 6.1%, and +2.6% and 2.0% respectively for 2024 and 2025. It should be noted that October will see a base effect which increases the price level: from October 2023 to March 2024, the reduction in VAT on gas and district heating a year before is likely to feed through into the figures.


The restrained economic development fed through into a weak autumn pick-up on the labour market. Unemployment did fall in September as usual, but the drop was weaker than the average of recent years. In seasonally adjusted terms, there was a rise of 10,000 persons. Employment increased by 35,000 in August compared with the previous month (seasonally adjusted). In July, the number of jobs subject to social insurance contributions rose only slightly, by +8,000 (seasonally adjusted). The amount of short-time work fell further in July. The notifications of short-time work did rise in September, but this was mainly due to certain automotive manufacturers whose output was hit by supply constraints resulting from flooding in Slovenia. Leading indicators from the Institute for Labour Market Research and ifo were noticeably worse in September, and the number of reported vacancies also fell. Companies are less willing to take on new staff, and unemployed people are finding it more difficult to get a job. More people were made redundant in the catering and retail sectors. However, the rise in employment has continued into August, mainly driven by foreign employees. The number of Germans in work is declining for demographic reasons. The labour market is not expected to see a recovery unless and until the economy picks up speed in the spring.


1 This report is based on data that were available as of 12 October 2023. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted for calendar-day and seasonal variations.