Mobile-Menu

IMK economic monitor The recession risk has slightly decreased again

Source: Hans-Böckler-Stiftung | Translated by AI 2 min Reading Time

The prospects in Germany are slowly brightening: The probability that the German economy will go through a recession in the next three months has slightly decreased in recent weeks, after it had already noticeably fallen in April, as shown by the economic indicator of the IMK of the Hans-Böckler-Foundation.

Just like in April, the traffic light system-based early warning instrument for the economy shows "yellow-red", which signals increased economic uncertainty, but no acute risk of recession.(Image: Free of licensing. / Pixabay)
Just like in April, the traffic light system-based early warning instrument for the economy shows "yellow-red", which signals increased economic uncertainty, but no acute risk of recession.
(Image: Free of licensing. / Pixabay)

The economic indicator of the Institute for Macroeconomics and Economic Research (IMK) indicates a recession probability of 45.6 percent for the period from May to the end of July. At the beginning of April, it was 48.7 percent for the following three months, and at the beginning of March it was still 58.3 percent. The statistical scatter in the indicator, which reflects the uncertainty of economic actors, has also decreased from April to May - from 18.7 to 15.4 percent. The economic early warning tool, which works according to the traffic light system, shows "yellow-red" as in April, signalling increased economic uncertainty, but no acute risk of recession. Before that, the indicator had been on "red" since June 2023.

  • The recent slight decrease in recession risk is partly due to the fact that foreign demand for German goods has revived recently.

  • On the other hand, the fact that sentiment indicators such as the ifo index have brightened and individual financial market indicators have improved has a positive effect. This includes the rising stock prices in expectation of interest rate cuts.

Many corporate bankruptcies cloud the picture

However, there are also countervailing trends that have prevented a more pronounced decline in the risk of recession. This applies, for example, to the high number of corporate bankruptcies. In addition, the development in the manufacturing sector remains subdued due to weakening domestic orders - even though the production of energy-intensive industries has "passed its low point", according to an analysis by the IMK, after energy prices have stabilised compared to 2023.

Private consumption is rising

"Thanks to increasing exports as well as the now again positive changes in real income and the resulting stronger increase in private consumption, the gradual recovery of the economy, which was hinted at last month, should continue; however, the dynamics remain subdued. In construction, even a counter-movement can be expected in the second quarter, because the mild winter made it possible for many construction activities to progress," summarises IMK economic expert Dr. Thomas Theobald the current economic picture. Furthermore, the "geopolitical uncertainties", foremost among them the wars in Ukraine and the Middle East, continue to pose difficult-to-calculate risks for the economy.

Subscribe to the newsletter now

Don't Miss out on Our Best Content

By clicking on „Subscribe to Newsletter“ I agree to the processing and use of my data according to the consent form (please expand for details) and accept the Terms of Use. For more information, please see our Privacy Policy. The consent declaration relates, among other things, to the sending of editorial newsletters by email and to data matching for marketing purposes with selected advertising partners (e.g., LinkedIn, Google, Meta)

Unfold for details of your consent

Related content