When Germany sneezes ...?

Germany has slipped into recession as last year’s energy price shock takes its toll on consumer spending.

Output in Europe’s largest economy dropped 0.3% in the first three months of the year, following a 0.5% contraction at the end of 2022, official data showed Thursday.

The Federal Statistical Office downgraded its previous estimate of zero growth in gross domestic product (GDP) compared with the previous quarter. A recession is defined as two consecutive quarters of declining output.

“The persistence of high price increases continued to be a burden on the German economy at the start of the year,” the office said. “This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023.”


And in the US the first two quarters of 2022 had negative growth. We’re still waiting for that Godot recession…



We may have negative growth again this year but recessions during the demand side part of the cycle are shallow.

We are currently dodging the DC bullet that would have mattered.

Would that be the DeLoser bullet?

When Germany sneezes, I say gesundheit. That’s the polite thing to do, and their economy is healthier than their GDP alone would indicate.


The HCOB final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Germany’s economy, fell to 43.2 from 44.5 in April, the fourth consecutive monthly decline and the lowest reading since 2020. The manufacturing PMI has been below the 50 level that separates growth from contraction since July 2022.


Chemical giant BASF has been a pillar of German business for more than 150 years, underpinning the country’s industrial rise with a steady stream of innovation that helped make “Made in Germany” the envy of the world. But its latest moonshot — a $10 billion investment in a state-of-the-art complex the company claims will be the gold standard for sustainable production — isn’t going up in Germany. Instead, it’s being erected 9,000 kilometers away in China…

“We are increasingly worried about our home market,” BASF Chief Executive Martin Brudermüller told shareholders in April, noting that the company lost €130 million in Germany last year. “Profitability is no longer anywhere near where it should be.” Such malaise now pervades the whole of the German economy, which slipped into a recession in the first quarter amid a flurry of surveys showing that both companies and consumers are deeply skeptical about the future…

Confronted by a toxic cocktail of high energy costs, worker shortages and reams of red tape, many of Germany’s biggest companies — from giants like Volkswagen and Siemens to a host of lesser-known, smaller ones — are experiencing a rude awakening and scrambling for greener pastures in North America and Asia. Absent an unexpected turnaround, it’s hard to avoid the conclusion that Germany is headed for a much deeper economic decline…

New orders at the country’s engineering companies, long a bellwether for the health of Germany Inc., have been dropping like a stone, falling 10% in May alone, the eighth consecutive decline. Similar weakness is apparent across the German economy, from construction to chemicals. Foreign interest in Germany as a place to invest is also receding. The number of new foreign investments in Germany fell in 2022 for the fifth year in a row, hitting the lowest point since 2013.

“One sometimes hears about ‘creeping deindustrialization — well, it’s not just creeping anymore,” said Hans-Jürgen Völz, chief economist at BVMW…



The German reset post cheap natural gas from Russia cut off is one of the crux macroeconomic events in the current world. Knock on side effects will ripple throughout Europe.

But they are smart and resilient, and I am convinced they will reinvent but it may take a decade or so…



While the cessation of cheap and ready energy didn’t help, most of the issues discussed here about Germany began long before the recent Russian war. I worked closely with many German engineers over the last 20+ years and their complaints about red tape, permits, applications, and fees have become more and more bitter over the years. They say/imply that anyone who wants to form a startup today would never even think of doing it in Germany.


Right on schedule German tech funds are surging with investment.



YES. They said it when I first visited Germany over 50 years ago and they still say it now. I think it is largely true, Germany has an insanity for regulation. The only place I disagree with laughter is your “never even think of doing it in Germany”, because they look outside Germany and shudder over all manner of other problems.

And Leap’s post just makes the laugh line more explicit.

david fb


Regulatory red tape stagflation?

Who said, “Government is the problem, not the solution?”

Tesla was pretty good at navigating the German Green Red Tape bureaucracy in building Giga-Berlin in Brandenburg, the camel’s nose in the German auto industry’s tent.

The Captain

How’s that for mixed metaphors?


Americans go into sub-conscious mode where everyone is poor and getting poorer.

We must save them. Never mind that the Germans had 40 years of demand side econ and are much wealthier than we are.

The reason for our tech industry is we could not afford the labor. We needed the shortcuts the cost savings the hope list that often did not pan out. See scrapheap of bankrupt companies.

VDA survey: automotive industry flees Germany

The German Association of the Automotive Industry (VDA) conducted a survey of SMEs [small and medium manufacturers] from May 15 to 23, 2023. A total of 128 automotive suppliers and manufacturers of trailers, bodies and buses were surveyed…

The survey shows that 27 percent of the companies surveyed are planning to relocate their investments abroad. Of these, 43 percent want to move to another EU country and 30 percent to North America. No company wants to increase its investment in Germany.



Reacting to a new report by the International Monetary Fund that projects Germany’s economy will shrink 0.3 percentage points this year, Habeck told German public broadcaster ARD on Wednesday evening, “The data certainly isn’t good.”

Germany’s statistical office had already warned in May that the country entered into a recession. Some of Germany’s biggest companies have begun to ditch the fatherland, triggering fears of deindustrialization…

“I also don’t want to ignore the fact that this will put a burden on people,” Habeck said. “We have a major transformational period ahead of us until 2030,” during which time Germany would move from a traditional, fossil fuel-dependent industrial base to green energies like hydrogen, he said. He advocated state support in the form of a cap on electricity prices for energy-intensive companies in international competition, “so that they can withstand the challenges of the transformation and have enough money to invest.”



Instead Germany will turn to a military industrial complex to create jobs and an economic backbone. Europe will militarize. In the process Germany is turning to supply side economics.

To gain productivity small redundant breweries and other local small mom and pops will give up the ghost.

All of this will bring up the standing of the Euro as a reserve currencies. As German factories relocate around the Americas Euros will flow.

It wont just be Mexico industrializing. Just dawning on me.