The German economy is shrinking. Private sector performs its worst since first wave of the pandemic

Russia may have resumed the supply of natural gas through Nord Stream 1 pipeline after a 10-day closure due to maintenance but the German economy continues to be on the edge of recession.

According to a Bloomberg report, Germany's economy is shrinking this year as inflation and the sanctions on Russia after the invasion of Ukraine continue to backfire.

Reportedly, private sector activity in the European nation has fallen steeply.Some experts are dubbing it the 'Worst performance of private sector since the peak of the first wave of the Covid pandemic'.

The Purchasing Managers' Index (PMI) measured by S&P Global stood at 49.2 in July, down 3.2 from June's 52.4, while the manufacturing index dropped 2.8 to 49.2 from 52.0, recorded a month earlier in June. it is pertinent to note that 51.2 and 50.6, are the respective markers that signal growth in activity. However, Germany is down in both markers.

Both markers were expected to be above 50 but the downturn in manufacturing, decline in output and the uncontrollable yet delicate situation with Russia added to the misery.

According to an S&Ps economist, Germany had its moment in the sun when it enjoyed a growth boost as the virus-related restrictions were eased. However, after several 'uncontrollables' did not go Germany's way, the economy started contracting.

Germany's woes have been compounded by the condition of the Euro which fell 0.9pc against the dollar to $1.0141. The situation with Russia is not helping Euro gain its lost power either.

However, the biggest crisis for Germany is yet to come. The winters are approaching and if Russia continues to supply natural gas at the current levels, there can be a dark, cold winter in Berlin, leaving millions in the lurch.

The private sector, already in the doldrums could be crippled for good as the industry fails to find an alternative. If the gas supply is contracted, the private companies will either have to reduce production or altogether slam down the shutters.

Either way, Germany's economy could be hit. Russia understands the leverage and has been issuing routine threats to Germany, one of the most vocal voices against Russia's invasion of Ukraine.

(With inputs from agencies)

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