German economy on verge of strengthening

Private sector activities in Germany entered growth territory again in June with the recovery of the manufacturing sector, which recorded the strongest increase in new orders in the last three years. S&P Global announced the June results of the Hamburg Chamber of Commerce (HCOB) Leading PMI Data. Accordingly, the composite PMI, which was 48.5 in May, rose to 50.4 in June, reaching the highest level in the last 3 months. The market expectation for the composite PMI, which rose above the 50 level indicating growth again, was for it to rise to 49 points in June. The service sector PMI in the country also rose from 47.1 to 49.4 in June, reaching the highest level in the last 3 months. The manufacturing industry PMI rose from 48.3 to 49 in the said month, reaching the highest level in the last 34 months. The fourth consecutive increase in industrial production, including June, is the strongest increase since March 2022. "Business activity in Germany returned to growth in June, rising slightly after falling for the first time in five months in May. The recovery, led by the manufacturing sector, was supported by the first increase in new orders in more than a year," S&P Global said in a statement. "GERMANY MAY EXIT FROM THE WAVY GROWTH MODEL" It was stated in the statement that companies in the Eurozone's largest economy are still continuing to reduce their workforce, and that companies are slightly less optimistic about the outlook for the economy compared to the previous month. Hamburg Commercial Bank Chief Economist Cyrus de la Rubia, in his assessment on the subject, stated that the manufacturing PMI is still in a bit of a recessionary zone because, for example, employment continues to be reduced, but the trend has been upward since the beginning of the year. De la Rubia pointed out that it is also encouraging that order intakes in German industry have started to grow again, and said, "This means that the momentum in recent months cannot be attributed solely to advance orders from the US, where many companies have stockpiled goods in anticipation of high customs duties. Germany is likely to exit its zigzag economic growth model (one quarter of positive growth followed by one quarter of contraction) that has been going on for two years." While over 50 points in the PMI data indicates growth, below indicates contraction. The manufacturing and service sectors constitute more than two-thirds of the German economy. THE GERMAN ECONOMY WAS HAVING DIFFICULTY IN GROWTH The German economy had grown by 0.4 percent in the first quarter of 2025, a stronger-than-expected 0.4 percent. However, the tariff dispute between US President Donald Trump and the EU continues to cause uncertainty among companies and consumers. While the tariff wars and some of Trump's statements have fueled concerns about the negative impact on global trade, most analysts see Trump's tariff policy as a "special risk" to the growth of the German economy. The German economy, which is more dependent on the manufacturing sector than other countries in the region, also remains fragile due to persistent weakness in production. The economy contracted by 0.2 percent in 2024 compared to the previous year. It was the second consecutive year of contraction as increasing competition with China and structural problems slowed the economy. On April 24, the government had lowered its growth expectation for this year, which was previously announced as 0.3 percent, to zero due to the impact of global trade tensions following US President Donald Trump's policies.