Economic Emergency Braking in the USA and Surprising Recovery in Germany

At the beginning of January, the US economy was still the world’s economic engine, while Germany – after negative growth in the fourth quarter – was heading for a very weak first quarter.

“However,” says Carsten Mumm, Chief Economist at Privatbank DONNER & REUSCHEL, “the current flash estimates of the Markit purchasing managers’ indices paint a different picture.” With an unexpected dynamism in economic activity both in industry and among service providers, Germany has exceeded the expansion threshold of 50 points again for the first time.

The tense supply chains in the industrial sector appear to be gradually easing, allowing for a significant expansion in production. In addition, new orders rose again in all Sectors, while cost pressures remained high.

In the USA, on the other hand, the picture is quite different, depicts Carsten Mumm: corporate sentiment in the manufacturing sector fell slightly and the services index fell to just over 50 points. The background was the combination of lower demand, worsening supply chain problems and the shortage of workers.

The managers surveyed are still reporting sharply rising costs and the resulting significant increase in sales prices. The problems faced by companies are mainly related to production and are primarily due to the rampant omicron wave.

However, given the currently falling number of new cases in the USA, the Chief Economist hopes that the infection peak has already been passed and that the number of new cases, based on experience from Great Britain, for example, is likely to fall quickly in the short term.