Germany’s gross domestic product (GDP) rose unexpectedly by 0.3% in the second quarter of this year, technically bringing an end to the country’s deepest recession since World War Two.

The Federal Statistics Office (Destatis) revealed in August that the preliminary quarter-on-quarter rise was led by an upturn in private and public consumption, construction activity and net trade.

Year-on-year, the German economy shrank by 7.1% in the second quarter, the data showed.

Some economists had forecast a 0.3% contraction in GDP for the second quarter.

However, the German economics ministry says that, prior to the publication of the latest GDP figures, the economy “probably stabilised in the second quarter”.

Germany was thrown into recession earlier in this year because its exports collapsed.

Figures from Destatis now show German exports have grown at their fastest pace for nearly three years at 7%, with particularly strong demand from rapidly-growing economies such as China.

According to provisional results issued by the Deutsche Bundesbank, Germany’s balance of payments showed a surplus of 13.3billion Euros in June 2009, compared with 19.5billionEuros in June 2008. Encouragingly, the Deutsche Bundesbank also reported in August that whilst many small and medium-sized enterprises (SMEs) in Germany are feeling the heavy strain of the financial and economic crisis they have been able to successfully consolidate their finances.

It predicts that with such a solid basis to work from, “these enterprises are in a much better position to overcome the effects of this recession than they were during earlier downturns”.

Speaking to LCNi before the official announcement that the country was out of recession, suppliers to the German textile care industry expressed some optimism, despite the recession’s effects.

The decline in Germany’s exports helped to fuel an equal recession in the domestic economy, according to John Balman, sales director of Alliance International, manufacturer of the Ipso brand.

He observed that the recession had a clear impact on unemployment and spending. For the laundry business in particular, this meant a lower level of capital investment and more renting.

Jörg Schwerdtfeger, responsible for sales and technical support at chemicals specialist Büfa Reinigungssysteme agreed that exports are down, but even before the official announcement saw improvement ahead.

German consumers feel uncertain about the economy and government statements do not reassure them. “The public is waiting for the outcome of the September election.”

Michael Harre at Kannegiesser said that although home consumption was stable, the biggest concern for manufacturers was the decrease in exports.

Some companies have put their employees on “short working”, with the government covering part of the cost.

The arrangement allows companies to reduce costs without releasing workers but this option is only available for a limited period.

According to Uwe Stahl, joint CEO of the family-run manufacturer Stahl Wäschereimaschinenbau, export sales have fallen across the German engineering sector. “Our industry is experiencing a slowdown in export sales to existing customers,” he said.

“Fortunately, we are able to offset this trend in part with business from new customers.” Capital investment in the domestic market had decreased, he adds.

Schwerdtfeger at Büfa says that the move to outsource laundry services is now being reversed and that there is a clear indication of on premise laundries being re-built, especially in the care-home sector. Although there are some specialised laundries working in this field, smaller care homes are taking charge of their laundry service again.

They are finding that small-scale operations with two washer-extractors can handle the home’s linen and residents’ garments.

However, the catering sector continues to outsource laundry. One reason for this might be that linen from this sector often has a variety of difficult stains that need special treatments. The textile rental sector, which supplies hotels, hospitals and heavy industry is still growing, but is affected by a price war. Such laundries have invested heavily in the past, so they work longer shifts and offer very cheap contracts to keep the machines working at full capacity.

Schwerdtfeger says that Germany’s healthcare sector is more highly regulated than those in other European countries. Stringent regulation with a strict system of inspections to ensure that hygiene standards are met leads to a high quality. But he warns that price wars are beginning and quite often the healthcare laundries are providing services at low prices.

Andreas Schumacher of Intex, the Industrieverband Textil Service, says that the healthcare market has great potential.

Demographic changes mean that it is a growth market in most states and an ageing population is increasing the numbers who use healthcare services. So he believes that in future there will be less emphasis on price and hospitals will be seeking partners that can help them provide value to patients.

Juan De Cruz, manager of Girbau Deutschland, the German arm of the Spanish manufacturer, says Girbau is experiencing the same growth in healthcare business even though the building of new care homes is slowing. He says: “The customers are special and they want specialised solutions for their laundries.”

There is still a clear trend towards outsourcing laundry, particularly in the catering sector and in renting textiles, which are picked up, washed and redelivered by the owner, says John Balman at Alliance/Ipso.

Business is good for textile rental companies. “They will attract more customers if they can ensure good quality and deliver on time,” says Balman. He adds that increased business has also led to greater competitiveness which has squeezed prices and margins.

In the hygiene/healthcare sector, the demand for new equipment is growing, though many customers are still postponing investment, he adds.

Stahl says that outsourcing of linen care has always been continuously subjected to trends and countertrends.

“This does not affect us very much, since we have designed our product range in such a way that we can serve both sides, the heavy duty laundry and the OPL. Hygiene regulations are indeed becoming stricter and laundries are increasingly required to use barrier type washing machines.”

He adds: “We anticipated this development and we are glad that we can offer a comprehensive range of suitable machines.”

Michael Harre at Kannegiesser says that Germany’s hotel sector has suffered from the slower economy this year while the hospital sector was stable.

He says that there is an increasing demand for linen service in nursing homes, but these customers need a flexible service so laundries need to adapt their distribution patterns.

Textile rental companies still are looking to minimise labour and energy costs as in previous years. Harre explains that they are trying to be more competitive by offering a better service. This could also mean they offer a wider range.

Even the laundries that serve hospitals are offering better quality and sometimes the hospitals are insisting on higher standards. This is driving the discussion away from price but if the laundries are to improve their service without incurring higher costs, they need the right machine technology.

John Balman at Alliance says that while the economic situation is taking priority over environmental problems, the ability to make savings through more efficient wash processes is becoming important. He believes it would come after the three main criteria of price quality and serviceability.

Uwe Stahl agrees and says that while the market does have environmental concerns, such concerns are being pushed to the background, and people are more worried about the state of their finances and the difficulties in re-financing.

Nevertheless he says that environmental protection measures have only been postponed.

He adds that his company is concerned about the environment and saving water and energy is important for German customers. “Those manufacturers who ignore this in these difficult economic times will fall behind completely,” says Stahl. “We are convinced that this environmental awareness will soon be world standard and with our water and energy saving technology, we are well-prepared.”

Harre at Kannegiesser explains that environmental laws are still very strict in Germany – perhaps the strictest in the world.

High taxes on energy create higher energy costs, while water and sewage costs are still high.

So laundry managers see an advantage in buying equipment that saves resources. They believe that investment in energy efficiency brings a long term reduction in costs. Machine suppliers that provide this get preference and customers also want to deal with manufacturers that can produce complete energy saving concepts.

Drycleaning downturn

Schwerdtfeger at Büfa says the Germany drycleaning sector is still declining. There are around 2,800 drycleaners left in Germany and a further 10% decline is expected.

Jürgen Tagge, head of the drycleaning competence centre of the Hohenstein Research Institute, says that in the 1970s and 1980s Germany had 10,000 drycleaners , but numbers have gradually declined and Tagge says the sector is still contracting.

Peter Wennekes, secretary general of CINET – Comité International l’Entretien du Textile – says with a population of 82.3million, the German drycleaning sector in 2007 had around 3,500 units generating total turnover of around 1billion Euros a year.

In the same year, German consumers spent an average of 12.21Euros on drycleaning.

However, Germany’s drycleaning businesses were also the largest in Europe with turnover worth 286,000Euros per unit per year.

The trend towards concentration within the industry will continue, while new legal regulations will continue to be a burden, according to Friedrich Eberhard, vice-president of the German Textile Dry Cleaning Association Deutscher Textilreinigungsverband (DTV).

He says that legal regulations, international agreements and changes in consumer behaviour have affected the industry and that, given the overall economy, drycleaners cannot raise their prices to cover their increased costs.

John Balman at Alliance says that while there has been a further decline in drycleaning, this has spurred growth of wetcleaning as a partial substitute.

Büfa’s Schwerdtfeger also reports “a strong increase in sales of wetcleaning products.”

He adds that as Germany has been a leader in environmental matters its regulations are the most stringent in Europe and ensure that where perc and hydrocarbon are used, they are safe.

So there is less demand for alternatives such as GreenEarth, Drysolv or liquid carbon dioxide.

Because three of the leading manufacturers of drycleaning chemicals are based in Germany, and machine technology is state of the art, with the further option of a sophisticated wetcleaning process, he believes that any cleaning problem can be solved.

How will drycleaning fare in the future? Tagge believes that even when the economy improves and consumers start buying more clothes, they won’t necessarily spend more on drycleaning.

He feels it is possible to raise the image of textile cleaning through target-group-specific advertising campaigns and high-quality service standards.

DTV’s Eberhard is also addressing the problem of improving the image of drycleaning and the future of the industry. He believes that social change means disposable income in the middle class is dropping, while low-wage earners cannot afford drycleaning.

Eberhard says that drycleaners “unconsciously drive away affluent customers” and singles out the failure of cleaning methods to deliver consistent quality at a standard expected with high-grade garments.

In addition to his role at the DTV, Eberhard is also chairman of EFIT, the European association that researches innovation in textile care. EFIT has recently launched the FashionCare Service Initiative, which hopes to attract more middle income customers by guaranteeing quality. EFIT’s approach is to develop an internationally useable control system that will be supported by garment manufacturers, machine suppliers and textile care specialists.

The system will allow drycleaners to “manage” their own quality using existing systems and also have their standards monitored by external experts.

In principle, the system works so that customers pass their garments to an EFIT-approved drycleaner, who provides high-quality results in accordance with the quality guidelines. The scheme will also provide advice or help in the case of damage. The garment manufacturers in this initiative will advise the textile care industry on the preparation of the quality guidelines and provides information about new products.

Industry associations will also have a part to play by advising consumers about the scheme and by recommending them to find EFIT-approved cleaners.