Germany: Gradual recovery with energy risks – Deutsche Bank

Deutsche Bank Research’s Germany Blog analyses August hard data, highlighting volatile one-offs in construction and manufacturing but more encouraging fundamentals. Senior economists Marc Schattenberg, Felicitas Henze and Eric Heymann note healthy order books, improving sentiment indicators and fiscal stimulus supporting Q4 activity. They still flag geopolitical risks to fossil fuel prices and project full-year German GDP growth at 1%.

Manufacturing stabilizes as orders improve

"More broadly, two key factors point toward further stabilization in the manufacturing sector."

"First, order books across several industrial sectors remain healthy, despite a recent softening in incoming orders."

"Second, the significant improvement in manufacturing sentiment indicators—particularly their forward-looking production expectations components—signals that a further, albeit initially gradual, recovery is on the horizon."

"This is partly driven by fiscal stimulus increasingly feeding through to the real economy, which should support a pickup in economic activity in Q4."

"However, a key downside risk to both manufacturing output and the broader economy remains, particularly regarding the geopolitical impact on fossil fuel prices."

"Overall, we forecast full-year GDP growth of 1%, in line with the market consensus."