Wachstumskurve mit Kugelschreiber symbolisiert die wirtschaftliche Lage.

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  • At the beginning of Q3, the industrial sector was able to increase its output again.1 Supply bottlenecks will, however, continue to put a damper on industrial turnover. Nevertheless, there is a positive overall economic dynamism. While the rise in infections is dimming down expectations in the services industries, the real situation has improved. Going forward, it is likely that growth will normalise in Q4.
  • Industrial output expanded by 1.3% between June and July. The mechanical engineering and automotive sectors, which had recently been suffering from semiconductor shortages, were able to increase their output. On the whole, the outlook for the industrial sector remains cautiously optimistic given this expansion and the persisting high level of orders.
  • Retail sales dropped in July.
  • Starting from a high level, the inflation rate picked up only slightly between July and August. It has been considerably elevated since the beginning of the year, due to special factors. Once these special factors cease to exert their influence as of 2022, however, the inflation rate is expected to fall markedly again.
  • The remarkable recovery of the labour market continued through August. Again, the unemployment rate fell considerably in seasonally adjusted terms; gainful employment saw an unusually strong rise in July in seasonally adjusted terms. Also, short-time work continued to fall in June, with another significant decrease expected for the coming months.
  • There have been no signs of a wave of insolvencies, even though the notification requirement has been restored to fully application since May. In fact, Germany’s local courts registered 17.7% fewer filings for insolvency in the first semester of 2021 than in the first semester of 2020. No rise in insolvency notifications has been reported by the Federal Statistical Office for July and August, and while it is not impossible that the number may rise in the coming months, any such rise should be very moderate indeed.

    [1] The report is based on data that were available as of 10 September 2021. 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.


Germany’s industrial sector was able to increase its production further at the beginning of Q3. Nevertheless, there are persisting bottlenecks in the supply of intermediate goods, which are likely to continue to have a negative effect on some parts of the industrial sector in the coming months. Growth in the services industries is returning to normal, following strong growth over the past few months. The manufacturing sector registered a rise in its output in July, but continues to be affected by supply shortages in some areas. Industrial orders picked up considerably, reflecting robust demand. July was the fifteenth consecutive month in which Germany was able to increase its exports. It is true that German exporters were a little less confident in August, but overall sentiment remains fairly positive in the long-term comparison. Global industrial output and global trade expanded in June, highlighting the robustness of the global economy, even despite a decline in dynamism. Recently, expectations in the services sector have been held back by uncertainty caused by the rise in infections. Since the end of lockdown in May, however, which unleased fresh cyclical dynamism, the situation has been viewed in a more positive light. Retail sales fell in July compared to the preceding months, but this was largely due to the sector’s very strong performance in June. The recovery on the labour market is continuing, with another fall in unemployment and also in the number of people in short-time work, which now stands at approx. 1.6 million. Overall economic output can be expected to have risen in this ongoing Q3. Going forward to Q4, it is likely that growth rates will normalise. However, the risk posed by potential new virus variants and their influence on infection rates remains the main source of uncertainty for further economic development.


The upswing in global economic activity has recently slowed down a little. Global industrial output in June grew 1% over the preceding month and the global trade volume also expanded by a slight 0.5%, but June was also the third consecutive month that saw the sentiment indicators take a turn for the worse. In August, the J.P. Morgan/IHS Markit composite purchasing managers’ index fell by 3.2 points to reach 52.6 points, which is only just above the growth threshold of 50 points. The mood in industry deteriorated only slightly, despite persisting shortages in the supply of key intermediate goods, whereas sentiment among service providers was far more subdued than before – probably in view of the increasing spread of the more contagious COVID-19 delta variant. Despite this, there are strong indications that global economic output will continue to rise in Q3, albeit at a slower pace than had been expected.


German foreign trade has recently lost some momentum. In July, the value of goods exports rose by a slight 0.5% over the preceding month, adjusted for seasonal variations and on a nominal basis (June: -0.5%). Goods imports fell by 3.5%, following a small increase in June. With export and import prices growing strongly and at the same time, the increase registered on a nominal basis is likely to turn into a decrease in price-adjusted terms. This effect should be even more pronounced for the import figures. By contrast, trade in services picked up considerably in July. Largely due to more foreign travel undertaken by Germans, services imports grew by 9.6%. Services exports even grew by 11.1%. The combined trade figure for goods and services exports rose by 2.4%, the respective import figure fell by 0.9%.

At national level, the slight slowdown in global economic recovery is reflected in the leading indicators for foreign trade and investment only to a limited degree. New foreign orders showed a marked increase of 8.0% between June and July. However, these figures are much affected by large orders and the three-month comparison shows only a slight rise (+0.2%) in new (foreign) orders. In August, the ifo export expectations for the manufacturing sector, although still quite confident, painted a somewhat less confident picture than before. This breather notwithstanding, the overall outlook for German foreign trade remains positive. A boost is being provided by the favourable economic development in important sales markets in Asia and in the United States.


Output in the manufacturing sector rose 1.0% between June and July. Industrial output increased by 1.3%; the construction sector recorded a 1.1% increase. The two-month comparison for June/July compared with April/May shows a slight decrease of 0.9% in manufacturing output. Whilst industrial output fell by a slight 0.4%, construction output fell markedly by 1.7% in the two-month comparison, albeit from a comparatively high level.

New manufacturing orders expanded by 3.4% between June and July. The two-month comparison of June/July versus April/May also points to a significant plus (+4.6%). Excluding large orders, however, order activity dropped slightly, by 0.2%.

Overall, new orders saw another considerable rise, following the one recorded in June. This was due to strong foreign demand (+8.0%), particularly from outside the eurozone (+15.7%). In contrast, domestic demand, which had been the driving force behind the rise in orders in the previous month, declined (-2.5%), but did remain at a high level. Overall, orders were marked by the strong growth in the production of machinery, pharmaceuticals and large orders in other (i.e. non-automotive) vehicle construction. New orders in the large mechanical engineering sector have been expanding continuously since December 2020, growing by almost 15% since the beginning of this year.

Following the slowdown in industrial production in Q2, the ongoing Q3 began on a brighter note. The important motor vehicles and parts sector increased its output by 1.9% in July. The mechanical engineering sector, which is of similar significance, saw a 6.9% increase in output. The shortage of semiconductors, which has recently slowed down production, is, however, expected to persist. Construction output remains at a high level. Given the constant high level of demand and the growth in output, the industrial outlook remains positive, even though surveys have shown that business prospects have recently been affected by less positive expectations, not least because of the rise in infections.


Retail sales (excluding cars) have recently fallen. Having increased by a hefty 4.5% in both May and June, retail sales fell by approx. 5% in July. The rise in infections is creating elevated levels of uncertainty on the part of both consumers and retailers. Following a strong recovery in May and June, retail sales of textiles, clothing and footwear fell by around 10% in July. E-commerce and mail order sales continued to normalise (-11.9%), but the figure was still well above the pre-crisis level (+21%). New car registrations by private owners once again rose considerably in August (+3.1%).

The ifo figures for business expectations in the retail sector dipped in August, in fact even more so than they had done in July. The GfK consumer climate index is expected to register a small decline in September, with the rise infections and resulting consumer insecurity as a main reason.

The consumer price level remained unchanged between July and August (±0.0%). Before, in July, there had been an increase of 0.9%, which mainly resulted from higher energy prices. The inflation rate, the year-on-year development of prices, rose by 0.1 percentage points to 3.9% in August. This comes after a strong hike by 1.5 percentage points in July. This sudden surge towards the middle of the year was the result of a base effect cased by the temporary reduction in VAT rates in the preceding year. In other words, the current consumer prices – which include the regular VAT rates – are being compared with prices that were subject to reduced VAT rates. Other special effects that have also resulted in a considerable increase in the inflation rate since the beginning of the year include the recovery of import and commodity prices and the introduction of carbon pricing. Once these special effects cease to exert their influence at the end of the year, the upward trend in consumer prices is likely to weaken considerably. The core inflation rate (excluding energy and food) rose slightly to +2.8% in August (from +2.7% in July). Energy prices soared 12.6% in year-on-year terms (July: +11.6%). Current developments on the commodity markets, however, suggest that the oil price will ease in the medium term.


The remarkable recovery of the labour market continued through August; prospects for the coming months are also positive. Following the loosening of COVID-19 restrictions, particularly in the hospitality, retail, and services sectors, unemployment and underemployment again fell considerably in August (in seasonally-adjusted terms), by 53,000 and 38,000 persons respectively. Typically, one would expect a seasonal rise in unemployment in the summer months. According to the unadjusted figures, however, unemployment fell by 12,000 to now stand at 2.58 million people. Compared with the previous month, the number of unemployed persons was down by 377,000. Gainful employment is also developing extremely well, with a seasonally adjusted increase of 100,000 persons.

According to the unadjusted figures, there were 45 million people who were gainfully active, which is an increase of 280,000 year-on-year. In June, the number of people in jobs subject to social security contributions saw a strong rise (+79,000 compared to May), and the number of people in short-time work dropped to 1.6 million (figures extrapolated by the Federal Employment Agency). The number of people in short-time work is expected to fall again by a considerable margin in July. Demand for labour continues to remain high. The leading indicators used by ifo and the Institute for Employment Research (IAB) improved again in August, from what had already been a very high level. The number of unfilled vacancies reported is also high. This suggests that the upswing on the labour market is likely to continue over the coming months.


In the first semester of 2021, the German local courts registered 17.7% fewer filings for insolvency than they did in the first semester of 2020. For July and August, the Federal Statistical Office reported a month-on-month reduction of 0.1% and 19.3% respectively in the number of companies filing for regular insolvency. The general insolvency situation thus remains unremarkable; only the first quarter registered a temporary increase in insolvencies following the shortening of the residual debt discharge procedure. On the whole, it is still not possible to rule out a slight rise in company insolvencies for the rest of the year; however, it would probably be fairly moderate – if at all noticeable.