German economy shows more signs of weakness: May corporate bankruptcies soared by nearly 31%, approaching a 7-year high point
The number of bankruptcies in Germany in May increased by nearly one-third compared to the same period last year, with the potential to surpass the level in 2017. The German economy is stagnating, with GDP unexpectedly shrinking in the second quarter, and the annual growth rate is expected to be only 0.1%. Warning signals of corporate bankruptcies are increasing, with the total expected to exceed 20,000 for the first time. The deteriorating business prospects in Germany have heightened concerns about economic recovery. The business climate index is declining, making economic recovery difficult. German industrial production is weak, with foreign demand falling short of expectations, putting pressure on the export powerhouse. German exports have declined, mainly due to weak demand from the United States and other EU countries
According to Zhitong Finance, the number of bankruptcies in Germany in May increased by nearly one-third compared to the same period last year, with hopes of surpassing the level in 2017. Data released by the German Statistical Office on Friday showed that this month's results reported 1,934 bankrupt companies with a claimed amount of approximately 3.4 billion euros (3.7 billion US dollars). This figure represents a 30.9% increase from the same period last year, with preliminary data indicating growth rates of 6.3% in June and 13.5% in July.
Since Russia cut off natural gas supplies that German industry relies on following the outbreak of the Russia-Ukraine conflict, the German economy has stagnated. The GDP unexpectedly contracted in the second quarter, with the European Commission forecasting a full-year economic growth rate of only 0.1% for Germany.
The German Chambers of Industry and Commerce stated in a declaration that warning signals of corporate bankruptcies are increasing, with the total expected to exceed 20,000 for the first time since 2017. The association added, "There is an urgent need to reduce energy costs, taxes, bureaucracy, and to expedite approval and planning processes to create better conditions for businesses to achieve commercial success once again."
Previously released data had already shown a surprising deterioration in Germany's business outlook, intensifying concerns about a rebound in the largest economy in Europe. Germany's IFO Business Climate Index for July dropped from 88.6 to 87, below the expected 89. In particular, Germany's IFO Business Expectations Index for July fell from a revised 88.8 the previous month to 86.9, contradicting economists' slight improvement forecast to 89.
Amid declining business confidence, Germany's PMI for July also plummeted significantly, highlighting the difficulty of the German economy to recover after nearly two years of stagnation. Germany's SPGI Composite PMI for July fell from 50.4 the previous month to 48.7, below the expected 50.7. This data further indicates that the recovery from months of stagnation will be even more challenging than anticipated.
A major reason for the weakness in German industrial production is that foreign demand has not grown at the expected pace, putting pressure on this export-oriented country. Data from the Federal Statistical Office of Germany showed that German exports of goods fell by 3.4% in June compared to the previous month, exceeding analysts' expectations of 1.5% and mainly due to weak demand from major trading partners such as the United States and other EU countries, causing the trade surplus to shrink from 24.9 billion euros in May to 20.4 billion euros (22.3 billion US dollars), below analysts' expectations of 23.5 billion euros