Economic researchers: According to experts, the risk of recession is decreasing

According to experts, the prospects for the German economy are slowly brightening. The probability that the economy will be one in the next three months recession The Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation announced that it had fallen noticeably in the past few weeks.

For the second quarter from April to June, the IMK economic indicator shows a probability of recession of 48.7 percent. At the beginning of March it was still at 58.3 percent for the following three months.

Early warning system no longer shows red

The decline in the risk of recession is so strong that the early warning instrument, which works according to the traffic light system, no longer shows red for the first time since June 2023, the researchers said. “Instead, it switches to yellow-red, which signals increased economic uncertainty, but no longer an acute risk of recession.”

The noticeable decline in the probability of recession is primarily due to the fact that production in the manufacturing sector has recovered. Energy prices have stabilized. The IMK therefore assumes that production in energy-intensive sectors and especially in the chemical industry has also passed its lowest point.

Other positive factors for the economy include improved sentiment and financial market indicators, the IMK announced. However, retail sales continue to be weak.

Moderate inflation and rising wages stimulate the economy

“There are more signs of an improvement in the economy than in previous months,” said IMK economic expert Peter Hohlfeld. He expects demand for products from Germany to increase over the course of the year and that household purchasing power will also improve “significantly” in view of moderate inflation and further rising wages. Both lead to a revival of the economy.

The IMK publishes the economic indicator monthly. The researchers determine how likely it is that Germany will experience a recession or a boom within the next three months. The latest available data on the most important economic indicators are taken into account.