The German economy in March 2020 – in anticipation….

The Corona-Pandemic is cutting through the global economy like a hot knife through an ice-cake – and the German economy is awaiting its „cut“ from the overall cake, so to say (or to stick last months parlour (here): awaiting its piece of sh*** coming back from the fan). But hey, let’s look into the German economy in some more detail:

Although there are still no hard figures on the development in the first quarter, the „economic wise (wo-)men“ („Wirtschaftsweise“), counselors to the German Government regarding the economic development, expect a decline of no less than -1.9% for the German GDP already in the first quarter of 2020 (here).

Starting at 11,857 points on 2nd March 2020, the DAX lost another 1,922 points in the course of March and closed at 9,935 points on 31 March 2020 (here) – escalating the meltdown started in February (where the index lost 1,155 points).

Astonishingly, German exports, GREW by 1.3% (MoM) and still by 0.4% (YoY), (seemingly in accordance with a then modestly growing German Target 2 balance). Until the end of March 2020, however, the German Target 2 jumped by Euro 114 Billion (!) from Euro 821 Billion to Euro 935 Billion. Although the German inflation-rate in general sunk to 1.4% in March (from at 1.7% in February 2020 (all YoY)). Howecver, in stark contrast the overall decline, prices for food increased by 9% (YoY) in March (cf. here).

After showing a small silver lining in January, German industrial orders declined by -1.4% (MoM) but increased by 1.5% (YoY) in February 2020. Also, Germany’s industrial production rose by a mere 0.3% (MoM), but declined by 1.2% (YoY) in February 2020.

Yet unimpeded by Corona, German unemployment-rate decreased by a further 60,000 (MoM), but increased by 34,000 (YoY) in March 2020 to now 2.335m unemployed, the unemployment rate decreasing by -0.2% to 5.1%. However, already at the end of March, 470,000 enterprises filed for „Kurzarbeitergeld“ in order to be able to keep their employees (here). Without this measure, there would surely already be more unemployed. German corporate insolvencies, although already coming from a record low, fell by another stagering -5.4% in January 2020.

Although most early indicators do not indicate the incoming SHTF-moment, the leading German sentiment indicators surely do: while the German (Industrial) Purchasing Managers’ Index (PMI) only fell rather moderately from 48 points on 2 March to 45.4 points on 1 April 2020, the ZEW Indicator (for the current situation) lostanother staggering 27.4 points and declined from -15.7 points in February to -43.1 points in March 2020. Also, the Ifo business climate index, fell sharply from at 96.1 points in February to 87.7 points in March 2020. This marks the biggest drop since 1991 and brings the index to its lowest level since August 2009

To sum up: Although I thought that TSHTF already in March, only the early sentiment indicators really suggest that, while there are positive patches remaining, such as the low unemployment rate (which is a lagging indicator, anyway, and any rise muffled by Kurzarbeitergeld). But the stark decline of those sentiment indicators serves as a forewarning for the coming impact of the downturn

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