Weak global demand has led to a collapse in Chinese exports. German industry is also feeling the effects of the ongoing recession. Meanwhile, the OECD expects a slow recovery in the global economy.
World export champion China felt the slowdown in global economic growth in May. Exports from the People’s Republic of China fell by 7.5 percent compared to the previous year, customs authorities announced today. Imports to China were also down 4.5% from forecasts. Clearly, despite the lifting of strict corona restrictions last December, the Chinese economy is not gaining momentum.
A slowing global economy and weak domestic demand are further slowing the expected post-pandemic recovery. The growth outlook for the second-largest economy, which has started the year well, is also deteriorating, even as China’s export machinery runs at a much slower pace. Recently, important leading economic indicators have fallen short of expectations.
OECD expects growth of 2.7%
Overall, however, the global economy is likely to grow again this year after years of rather weak growth. The OECD, an organization of industrialized countries, believes that the global economy is slowly recovering, and in its 2023 New Economic Outlook, predicts a global growth rate of 2.7%, which should accelerate slightly to 2.9% by 2024, according to the forecast.
According to the OECD, however, there is still a long way to go to achieve strong and sustainable growth, as global growth will remain well below the average of the decade before the corona pandemic. However, the bottom appears to be behind us as energy prices and headline inflation are falling and supply bottlenecks are easing. Private households are also relatively sound financially, according to the Organization for Economic Co-operation and Development.
Industry expands production only slightly
The German economy is likely to stagnate this year and grow by just 1.3% in 2024, according to OECD forecasts. High inflation is reducing income and saving, thereby depressing private consumption. The recovery of the German economy has so far lacked a decisive impetus: German industry produced only a small increase at the beginning of the second quarter, which was weaker than expected.
As announced today by the Federal Statistical Office, total production rose by 0.3% in April compared to the previous month. Industrial production fell 2.1% in March. “Production in the coming months is also likely to disappoint. As more and more orders left over from the corona period are being processed. In addition, the trend and sentiment indicators for new orders point to the downside,” judges Jörg Krämer, Germany Chief Economist of Commercial Bank.
‘Forecasts are still too optimistic’
Alexander Krüger, chief economist at Hauck Aufhäuser Lampe, also sees the increase in industrial production as “a drop in the ocean”. With this in mind, the private bank from Frankfurt am Main lowered its growth forecast for 2023 to minus 0.3 percent.
Jörg Krämer also believes that given the current economic data, the German economy is likely to shrink: “Many economists’ forecasts are still too optimistic.”