Data reveals German recovery from COVID-19 will be gradual
BERLIN (GERMANY) – According to a survey published on Monday, German industrial orders recovered moderately in May and a fifth of firms in Europe’s biggest economy. They feared financial distress and a painful recovery from the coronavirus pandemic.
The country has withstood the pandemic in a better way when compared to other big European countries, as it recorded fewer COVID-19 deaths. Its economy has stood firm for more than six weeks of lockdown. This was possible because of generous packages aimed to stimulate progress and with a decision to keep factories and construction sites open.
Data showing that industrial orders had grown by a record 10.4% after a month when restrictions were gradually relaxed almost a third less than forecast in a Reuters poll, while at the same putting down hopes of a quick return to the kind of business activity, which existed before the coronavirus crisis.
The Economy Ministry said, “The orders data signal that the manufacturing sector recession has overcome its low point. But the low level of orders also shows that the recovery process is far from over.”
Order intake was 30.8% lesser than in February, before lockdown measures were enforced a month later to mitigate the spread of the coronavirus. It was almost 30% weaker than in May 2019.
Fears of a slow recovery were made worse by an Ifo economic institute survey showing that 21% of firms are afraid that the pandemic could lead to a shutting down. It highlighted that mass insolvencies are expected in the coming months and might affect the economy.
The services sector is most affected, Ifo said. Around 85% of travel agents and tour operators said they were threatened by financial crisis, followed by 76% of hotels and 67% of restaurants.
Germany’s export-oriented manufacturers, witness to trade disputes between the United States and China, don’t show a better picture too. Looming uncertainties linked to Britain’s departure from the European Union and an automotive sector struggling with an expensive shift to electric vehicles was also an area of concern.
The government expects the economy to experience a crunch by 6.3% this year, marking its deepest recession since World War Two.
The data showed that the intake of order from the euro zone had surged by more than 20% when compared with a 2% increase from countries outside the single currency bloc.
The United States and China are Germany’s first and third biggest export markets, and expected recovery of the manufacturing sector in Europe’s largest economy is also dependent on the global trade, currently hampered by the pandemic, returning to normal.
ING economist Carsten Brzeski said, “Today’s industrial orders data brings two important messages: the lifting of the lockdown measures has brought V-shaped surges in activity but the return to pre-crisis levels will not be easy.”
(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field.