fbpx

German Economy Faces Clouds on the Horizon

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

The German economy likely shrank 0.3% in the fourth quarter of 2023 amid persistent inflation, high energy prices, and slower foreign demand, figures with initial estimates from the Federal Statistical Office revealed on Monday. Official figures for the last quarter of 2023 are expected to be announced on the 30 th of January.

The upwardly revised third quarter helped Germany to avoid two consecutive quarters of contraction, which is a definition of a recession. For the full year, German GDP is estimated to have contracted by 0.3% from 2022, the weakest among major European countries.

According to the International Monetary Fund (IMF) Germany is likely to be the only G7 economy that registered negative growth in 2023. The IMF predicts Germany to grow 0.9% in 2024, well below the 1.4% anticipated for advanced economies.

Stagflationary pressures and prospects of a recession are building up amid falling manufacturing activity. In the whole of 2023, the industrial sector output tumbled by 2%, driven by lower production in the energy supply sector. The manufacturing output also dropped, by 0.4% due to declines in the automotive industry.

The higher interest rates from the European Central Bank (ECB) aiming to combat sky high inflation, have compressed construction of new dwellings. Despite the high borrowing costs, building activity managed to rise by 0.2%.

The service sector still grew, although slower than before, and private consumption declined by 0.8%. Investments dropped by 0.3%, government spending shrank by 1.7%, and imports fell more than exports, according to the Federal Statistical Office.

The German economy has encountered severe headwinds since Russia’s war in Ukraine, which sent inflation and the cost of energy soaring. The surge in natural gas prices for the energy-intensive industries, following the halt of previously affordable prices, played a crucial role.

Concurrently, Germany grappled with skilled labour shortages, which in addition to the global slowdown in manufacturing activity, have exerted additional pressure on the huge factory sector. The multiple crises collectively, resulted in a deceleration of economic development in 2023.

Additionally, Germany faced increased competition from China, which was a former reliable market for German products. The eurozone aggressive interest rate hikes, unfavourable financing conditions, and weak domestic and international demand, further contributed to the strain of the German economy.

A graph with lines and arrows

Description automatically generated

Source: TradingView

While a modest recovery is expected in 2024, with the German Bundesbank central bank forecasting growth of 0.4%, the recent budget upset and potential shipping delays triggered by the conflict in the Middle East, could cloud the outlook.

In our view, this forecast may turn out to be an optimistic one, as Germany continues to deal with its recent economic crisis. Germany’s Constitutional Court shock ruling at the end of 2023 blew approximately €59 billion hole in the government budget, suspending its plans to revive the economy. Consequently, the budgets for both 2023 and 2024 were reworked.

The budgetary constraints could exert further pressure on consumer spending which has been declining throughout 2023. Additionally, a slowdown in the global economy could have an adverse impact on Germany’s exports, which had sluggish demand in 2023.

Despite the stagnating German economy, the DAX 40 index has reached a fresh all-time high of 17,003 points in mid-December 2023. As we enter 2024, the index may experience a pull back in the first quarter to unwind its strongly overbought momentum conditions; however, we see good prospects of slow and gradual recovery in the second half of the year. We remain cautiously optimistic about the stock market outlook in the year ahead and we see levels to 17,800 as achievable.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Related Posts

ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
Violeta-540x540-1.jpg
Violeta Todorova
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
Violeta-540x540-1.jpg
Violeta Todorova
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
Violeta-540x540-1.jpg
Violeta Todorova
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
Germany is facing a second recession this year as industrial weakness persists.
Germany is facing a second recession this year as industrial weakness persists.
Violeta-540x540-1.jpg
Violeta Todorova
Germany is facing a second recession this year as industrial weakness persists.
Germany is facing a second recession this year as industrial weakness persists.
Germany is facing a second recession this year as industrial weakness persists.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
Violeta-540x540-1.jpg
Violeta Todorova
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
ECB policy decision looms large with DAX 40 retreating ahead of Thursday’s meeting.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
Violeta-540x540-1.jpg
Violeta Todorova
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
German GDP contracts 0.3% in Q4 and the near-term outlook is not much brighter.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
Violeta-540x540-1.jpg
Violeta Todorova
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
Violeta-540x540-1.jpg
Violeta Todorova
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.
The dampening demand for industrial goods, weighs on Germany’s economic growth.

Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Marketing Lead

Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Head of Communications and Strategy

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

Gold Retreats But Rally is Not Over

Copper Ready to Explode

Q2 2024 Market Outlook: Rocky Road Ahead

What is an ETF? (Exchange Traded Fund)

How do Leverage Shares ETPs differ from other leveraged ETP issuers

How Do Leverage Shares ETPs Trade in Multiple Currencies

Build your own ETP Basket
Leverage Shares: Europe’s top leveraged and inverse ETP provider.
Main ETP benefits
Common investor questions

Get the Newsletter

Never miss out on important announcements. Get premium content ahead of the crowd. Enjoy exclusive insights via the newsletter only.

Welcome to Leverage Shares

Terms and Conditions

Notice

If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.

Cookies

Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2. 

By clicking you agree to the Terms and Conditions displayed.