Literally at the eleventh hour of September I got to finish my review of the German economy in August – rather for purposes of chronology than actual information. Still it is a worthwhile look to behold, the German German economy – after bottoming out in May (cf. here) – started its rebound in June (cf. here), the rebound gaining momentum in July (cf. here), August figures overall seem to indicate a further strengthening of this trend. But, hey, let’s look into the German economy in some more detail:
Although there are no new figures regarding the overall German GDP, the German minister for economic affairs, Mr. Altmaier believes that the GDP’s actual annual decrease will not exceed 5.8% (cf. here) – hence only a notch more than the crash during the GFC. Given the 10.1% (QoQ; even 11.7% YoY) decrease in Q2/2020 and the decrease by 2.2% (QoQ) in Q1/2020, such a view seems to be – let’s say – rather optimistic.
Meanwhile, the DAX, seemingly in anticipation of the coming „V“-recovery, gained considerably: starting at 12,319 points on 1 August, reaching up to 12,190 points on 26 August, it ended at 12,945 points on 31 August 2020, thus still more than 630 points higher.
The rebound of German industrial orders is cooling down somewhat: after having rebounded at least on a MoM-basis with an increase of 10.4% (MoM, but still an eye-watering -29.3% YoY) in May 2020 and skyrocketing by +27.9% (MoM; but still down -11.3% YoY) in June 2020, orders only moderately increased by another 2.8% (MoM) in July 2020 (but decreased by another -7.3% on a YoY-basis). Again, The same goes for Germany’s industrial production, which, after a strong rebound by +7.8% (MoM; but cratering by -19.3% (YoY) in May and by 8.9% (MoM, but -11.7% YoY) in June 2020, only gained 1.2% (MoM, but -10.0% YoY) in July 2020. Also, German exports, after a rebound of +9% (YoY, but -29.7% (YoY)) in May and 14.9% in June 2020 (MoM, -9.4% (YoY)), slowed the pace of their rebound to a still respectable +4.7% (MoM, still – 11.0% YoY) in June 2020.
After having passed the the psychologically important landmark of Euro 1 Trillion in June, the German Target 2 balance increased by another Euro 37 Billion to Euro 1.056 Trillion in total. Also due to the legal implementation of a VAT-decrease by 3% (from 19% to 16%), the German inflation-rate, after crossing the psychologically important zero mark and going negative by -0.1% in July, „rebounded“ to this mark of 0.0% (MoM) in August 2020.
Also, the German labor market stabilised with a modest increase by 45,000 (MoM, but an unbelievable +636,000 YoY) or +0.1% to 2.955m unemployed to an overall rate of 6.4% in August 2020. And according to the Bundesagentur für Arbeit, this increase in unemployment is only based on seasonal fluctuations. Also, the number of employees receiving „Kurzarbeitergeld“ is further decreasing decreasing from its highs in the spring. And, drum rolls, German corporate insolvencies even sped up their freefall by another (fasten your seatbelts) -38.9% (!!!!!!!!!!!!) (YoY) in August 2020.
The leading German sentiment indicators, mirrored the manufacturing sector’s moderate growth: the German (Industrial) Purchasing Managers’ Index (PMI), gained 1.2 points and ended at 52.2 points on 1 September 2020. There against, the ZEW Indicator (for the current situation) took a small set back to -81.3 points in August 2020. Finally, the Ifo business climate index rose from 90.5 points in July to 92.6 points in August 2020.
To sum up: The German economy continued its recovery, albeit with a much slower pace than in the previous months. Especially the respective MoM-comparison of key indicators shows that the German economy remains well below its 2019 figures. Hence, Mr. Altmaiers statement as to a crash of a „mere“ 5.8% in 2020 seems all the more optimistic – but a decrease of 10% seems now rather too pessimistic. For the time being, Germany’s economy is licking its wounds – and hoping for better times.