Along with a drastic fall in industrial production reported on Tuesday, there have been declines in consumer confidence and German competitiveness in recent weeks, topped off with weaker than expected job figures.
The production figures were “a disappointment,” Joachim Scheide of the Kiel Institute for the Economy (IFW) told The Local.
“No-one expected production to fall so much in August,” he said. “That could mean that GDP growth will sink this year in the third quarter and not grow much in the fourth.”
After a second quarter which also saw the economy shrink by 0.2 percent, that would technically put the country in a recession, defined as two consecutive quarters of economic contraction.
"August's big drop in industrial production all but confirmed that German industry is back in recession," said Jonathan Loynes of Capital Economics.
On top of the production figures, industrial orders fell by 5.7 percent in August, Destatis figures showed on Monday, the biggest fall since 2009.
“That means a bad outlook for the coming months," Scheide said.
A one-off fluke?
Other economic observers were not so quick to wave the warning flag of recession, with Andreas Rees of UniCredit saying “there is no reason to dig up the R-word again.”
“Shutdowns in the auto industry due to the late [school] summer holidays played an important role,” in what was essentially a technical drop in the figures, he added.
“German industrial activity will soften in coming months, as already indicated by business sentiment, but not tumble into the abyss.”
But Natixis economist Johannes Gareis said that the effect of the school holidays “could not explain the whole weakness.”
“The underlying growth trend of the German economy has heavily slowed down,” he said.
Not Germany's fault
Scheide points elsewhere to the origin of the problem, with the impact of European sanctions against Russia over Ukraine and the weak economies of Germany's trading partners to blame.
“The German economy is basically in good shape,” he said. “What's affecting the climate, putting pressure on activity, is uncertainty in the world economy and in international politics.”
“It's particularly disappointing that the big countries in Europe, France and Italy especially, are basically stagnating and not recovering.”
The figures showed that industrial orders from abroad were down 8.4 percent in August, while within Germany the drop was limited to just 2 percent.
Scheide does see positive signs which will allow Germany to pull out of the doldrums.
“There is strong momentum, especially from extremely low interest rates, which will stimulate the economy in the medium term.”
The European Central Bank (ECB) has cut interest rates to all-time lows and promised to pump cash into the economy to stimulate activity.
But Loynes said there was a “need for the ECB and the German government to give the Eurozone's biggest economy much more policy support.”
Germany's government has consistently been urged to invest and spend some of its record tax receipts, but that would mark a serious policy shift by Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble.