Softer growth - Easing logistics in Germany confirms expectations of a substantial easing in output

Germany’s slowdown will weigh on other European markets, which are already under pressure from inflation and energy prices

As economic activity across Europe continues to ease, MNCs should adjust their medium-term strategic priorities, especially considering that growth in 2023 will also remain relatively soft. Furthermore, while some markets across the EU, such as Poland and France, seem to be outperforming, strong inflationary pressures and a substantial slowdown in Germany will inevitably prove to be a drag on growth, and both consumer and business demand will ease substantially in the upcoming months.


German logistics activity in March and April 2022 contracted by 2.1% YOY and 1.5% YOY, respectively, indicating a notable softening in industrial activity. Producer prices in March increased by a record high of 30.9% YOY on the back of elevated energy and commodity costs. Easing industrial confidence throughout the eurozone confirms expectations of a notable slowdown that will extend throughout 2022 and well into 2023.

Our View

The notable easing in logistics activity in both March and April 2022 indicates that German industrial output has eased substantially and may have, in fact, contracted. While domestic manufacturers are likely to focus on optimizing their supply chains to soften existing pressures on output, elevated commodity prices, persisting supply disruptions, and growing uncertainty amid the escalating conflict in Ukraine will weigh on their ability to increase production. The ongoing slowdown of the German economy will weigh on the wider eurozone economy and will be closely followed by notable easing in activity in Italy, Spain, France, and Central European markets, which are also struggling with rising inflationary pressures and a substantial surge in energy prices. While market conditions remain within our base-case view for Europe, an immediate and full block of energy imports from Russia or a contraction in the US could easily plunge Europe into a renewed recession for the rest of 2022, which will be followed by only a soft and gradual recovery.

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