August remained a relatively quiet month – especially in comparison to June and July. The developments of the previous months (and the season) only took a small toll on the current German economy. However, the outlook has deteriorated.
As correctly predicted by HSH Nordbank, German GDP rose by 0.4% (on a QoQ-basis) in the second quarter of 2016 – hence remained untouched by the worldwide turmoil. Also, German unemployment only rose slightly from 6.0% to 6.1% (MoM) on a seasonally unadjusted basis, but is still shrinking on a seasonally adjusted basis according to a release of the Bundesagentur für Arbeit. The German inflation-rate remained at 0.4%.
Meanwhile the leading German business climate indices remained indecisive: The IFO-Business-Climate Index followed its July outlook (where it deteriorated from 103.1 in June to 102.2) and clearly worsened by 1.9 points from 108.3 points in July to 106.2 points in August. Also, again the expectations for the next six months were assessed more poorly for the second consecutive month. According to the IFO-institute, the German economy has fallen into a summer slump. In a somewhat stark contrast to IFO, the ZEW Indicator for the current economic climate rose by 7.8 point from 49.8 in July to 57.6 in August 2016; also the outlook for the following half year rose from a negative 6.8 in July to a positive 0.5 in August.
At least, the banking crisis did not take a turn for the bad in August – against my anticipations in my last report. Also, according to a recent study of the Institut der Deutschen Wirtschaft (IW) insolvencies of German corporations are low and will fall further – but so will innovation: „The declining number of insolvencies has been accompanied by a similar drop in the number of start-ups. As a result, the ratio of start-ups and closures to the total number of companies, known as the turbulence rate, is also decreasing, possibly signalling a decline in modernization of the German economy.“ This finding corresponds „well“ with another finding of a recent survey according to which 32% of German students want to become civil servants – in order to secure their life-style. That does not look like entrepreneurial spirit…
In total, the German ecomomy remains robust for the time being, however, recent events and developments have at least led to a darkening outlook for the coming months. On the long run, the ability of the German industry to modernise itself seems to be impaired (to put it mildly) – and this not only due to demographic reasons.