The German economy in November 2016 – Trump ante ports


Until 8 November the month began rather „ordinary“ and did not continue the rebound from September. Obviously, everybody was waiting for the outcome of the US Presidential elections. And then the unthinkable (at least from the viewpoint of the MSM) happened – Trump was voted President. And then, again, the unthinkable happened: stocks did not only NOT crash but – especially in the US – started a rally rarely seen.

In Germany, though, stocks gained only a few points: From 10,717 on Friday, 27 October, the DAX went down to 10,259 a week later, gathered momentum pre-election and reached its recent high with 70,735 already on 9, November. On 30 November, the DAX ended with 10,640 points. This rather indecisive movement might be attributed to the unknown but feared forthcoming „Trumponomics“. However, there are certain national data which also on its own might explain the sideward movement of the DAX.

First, economic growth in Germany slowed (further) in the third quarter, only reaching 0.2% („experts“ had expected 0.3%; cf. comments in Handelsblatt and Spiegel). This 0.2% signals the weakest growth within one year and most of it can be attributed to state consumption (for refugees) which rose by 4.5% (according to Handelsblatt print) in the third quarter of 2016. In the same period, investments for plant and machinery dropped (!) by 0.6%. As Die Welt rightly pointed out, the only ones saving Germany from a recession, are the refugees!

Second, German exports in September dropped again by 0.7% (MoM; and imports by 0.5% (also MoM) after they had rebounced and grew by 5.4% (MoM) in August 2016. This correlates with the shrinking engagement of German companies in foreign countries.

Third, German inflation-rate remained at 0.8% in November 2016 – the same as in October. However, while the ECB seems to see the need for additional measures to raise the inflation rate, I would issue a stark warning here: In accordance with Frank Stöcker from Die Welt, I have already warned in September that a rise in oil-prices might trigger a higher inflation-rate which in turn would lead to a rise in interest-rates. Now this scenario has already materialized – interest-rates are going up. Already before Trump was elected, but afterwards with a new momentum. And this without taking into consideration other factors already perceived as leading to higher interest-rates: Higher oil-prices (which will – after the OPEC-deal this week – probably indeed be on the rise) and the FED raising interest-rates in December (which for certain commentators seems to be a fact now).

Fourth, the German Purchasing Managers‘ Index (PMI) edged down from 55.1 in October to 54.9 in November 2016, therefore also not continuing its upward movement from the previous month.

On the other hand, German unemployment-rate hit a new record-low, with only 5.7% in November 2016. This is a reduction of 8,000 (MoM), 101,000 (YOY) respectively. Also, Insolvencies of German corporations are said to fall for another 6.4% on a YOY-level to around 21,700 cases. This would mean the lowest level of insolvencies since 1999 and the 6th consecutive annual decline.

German business climate indices are indecisive again: The Ifo Business Climate Index for November 2016 remained nearly unchanged at 110.4 points (from 110.5 points in October.) The upturn of the German economy, seemingly unfazed by the election of Donald Trump, remains intact, but with regard to the coming months they are somewhat less optimistic. The ZEW Indicator for the current economic sentiment, though, slightly declined from 59.5 in October to 58.8 in November, the outlook increasing for the fourth time in a row. Again, the two indices are not aligned, as they were in the summer already. It is therefore hard to really assess a common sentiment in the German economy regarding the coming months.

While the fate of Kaiser’s Tengelmann now seems to be positively cleared, with its stores going to Edeka and Rewe, Air Berlin’s fate remains unclear after having lost its equity due to a loss incurred in the third quarter. Deutsche Bank is currently doing fine – at least according to its share price which went above 15 Euros after Trump’s election.

My comment at the end of the October report („the long-term perspective is clouded with debt“) has been mirrored in an article in the November issue of Manager Magazin which rightly pointed out that regardless of who is becoming President of the USA – s/he won’t escape a recession. If the interest rates continue to rise throughout December – maybe with an „afterburner“ in the disguise of the FED – it is indeed hard to discern how the economies could escape a recession.


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