The German economy in February 2018 – a dent only?

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Well, well, at least, we will soon have a new government. That is the good news for the month. The economy, though, did not do so well in the last month, especially in comparison with January 2018:

Simply put, the German DAX, crashed in February: After closing at 13,189 on 31 January 2018, the index lost over 1,000 (!) points and hit rock-bottom with 12,107 on 9 February before again gaining some points and closing at 12,435 points on 28 February 2018. The leading German index thus followed the worldwide crash after the yield for US treasuries suddenly jumped on fears of increasing inflation.

At least, some consolation can be taken from last year’s data: Although growth seemingly slowed a little in the last quarter of 2017, German GDP is said to have grown by 0.6% in the fourth quarter and overall 2.2% in 2017. This is the highest growth rate in six years and the eighth consecutive year of growth for the German economy. New record, check.

As already reported last month, German exports, amounting to over Euro 1,279 Billion, set another record in 2017, though the net export surplus declined for the first time since 2009. During the last month further details were revealed: Unsurprisingly, China is Germany’s most important trade partner, but exports to Russia grew considerably despite the sanctions.

Also, the German unemployment-rate put a positive touch to the overall picture and fell from 5.8% in January to 5.7% in February 2018, the number of unemployed falling by around 24,000 (MoM) and falling by another 216,000 on a YoY-basis, now reaching 2.546m.

The German inflation-rate slightly increased from 1.3% in January to 1.4% in February 2018 (MoM), thereby still remaining well below the target-line of 2.0% set by the ECB.

There are no current or new figures regarding insolvencies of German companies or German Industrial production, the latter declining by -0.7% in December 2017 (cf. here). While, new orders for December 2017 increased by 3.8% (MoM), they are said to have decreased by -3.9% in January 2018. As usual, I would consider this high amplitude being a statistical glitch rather than a „trend“ – but we will take a closer look in the coming months.

The German (Industrial) Purchasing Managers‘ Index (PMI) – further declined from 61.1 points in January to 60.3 points in February 2018. The Ifo business climate index fell considerably from 117.6 points in January to 115.4 points in February 2018. Also, the ZEW Indicator declined from its all-time high of 95.2 points in January to 92.3 points in February 2018.

So, in total, February put a – hopefully small and one-time – dent into the German success story – at least regarding the DAX. Other key indicators, as far as available this month, point to a stable if not growing economy. So, let’s keep our fingers crossed that it does not lose its momentum!

CU next month!

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