83% Of German Firms With International Exposure Warn of Collapsing Revenues 

Germany eased strict social distancing restrictions on April 20 and started the process of reopening its economy as the virus pandemic curve flatten. However, the consequence of closing businesses and forcing people to stay home, along with shutdowns of international commerce, resulted in a deep recession in the first half of the year for the exporting nation. 

A new survey via the German Chambers of Commerce (reported by Reuters) said 83% of domestic firms with high international exposure had experienced a collapse in revenues. Many of these firms, about 93% of respondents, said the global economy could improve in 2021 or beyond. 

The survey is an eye-opener for Europe’s largest economy, and one of the largest exporting nations in the world, suggesting a global economic recovery in the shape of a “V” is not feasible for the back half of 2020. About 15% of the 3,300 companies surveyed said their annual turnover is expected to be halved. 

It was noted the impact of the virus-induced downturn, whereas at the start of the pandemic, crushed travel and tourism, has now impacted other sectors and rippled through the economy in the form of a demand shock. 

Fifty-nine percent of respondents this month (July) warned of slumping demand for their products and services, up from 57% in April. 

Under such conditions, firms are unwilling to invest – more than half of the respondents said they’re cutting CapEx abroad, compared with 35% in April.

We noted on Tuesday, global CapEx is expected to be slashed, on average, 12%, which is much larger than the 11.3% decline during the global financial crisis in 2008-09. Global capital expenditure weakness suggests a weak recovery is ahead.

German Chambers of Industry and Commerce released a report on Wednesday indicating exports will drop by 15% in 2020 with a slight recovery in 2021. 

The German government has unveiled a $146 billion stimulus package to jump-start the severely damaged economy. However, it appears the recovery, so far, has been a dead cat bounce that will not revert to 2019 growth activity levels for the next several years, or longer… 

German industrial production has a long ways to go… 

So what must be done to supercharge a recovery? Well, we offer insight here.