The German economy in November 2020 – Merry W-shape recovery to all!


Before the Lockdown 2.0, the German German economy – after bottoming out in May (cf. here) – rebounded in June (cf. here), July (cf. here) and August (here) – and somewhat climaxed in September 2020 (here) –
– as proven with the October figures (here) . The hard lockdown seems to have taken a toll at the German economy already in November 2020. But, let’s look into the German economy in some more detail:

Although there are no hard figures yet, a first expert estimates that the German GDP, will shrink by another 0.5% (probably QoQ) in the fourth quarter of 2020 – and that it will grow only by 3.8 to 5.3% in 2021, depending on the severity of the ongoing lockdown (here, in German).

Despite the not so rosy outlook and the lockdown, the DAX, probably driven by the anticipated start of the vaccination, rose considerably: Starting at 11,788 points on 2nd November, the index gained incredibly1,503 (!) points and ended at ended at 13,291 points on 30 November 2020. Against the background of the 1,174 point-loss in the previous month, we can now all see the perfect stock-exchange roller-coaster….

The rebound of German industrial orders is – after having increasing by 4.5% (MoM, but still down -2.2% YoY) in August and by +0.5% (MoM, but also only -1.9 YoY) in September – again rising in October 2020, with a respectable rate of 1.5% (MoM). Also, Germany’s industrial production, after gaining already a respectable 1.6% (MoM, but lost another considerable -7.3% YoY) in September, gained an even strong +3.2% (MoM; compared to a moderate loss of -3.0% YoY) in October 2020. There against, German exports, which gained traction in the last months with 2.4% (MoM, but stil down by -10.2% YoY) in August and 2.3% (MoM, but still down 3.8% YoY) in September, now only increased by a moderate 0.8% (MoM,, still down -6.5% YoY!) in October 2020.

Although the German Target 2 balance increased by another Euro 13bn compared to the Euro 1.047 Trillion in September and thus rose to Euro 1,060 bn in October 2020, the increase is rather modest in this month, too. Despite the ECB’s efforts to increase inflation, the German inflation-rate, after going negative by -0.1% in July was again negative in November 2020, with -0.3%.

Also, the German labor market, again, surprised with rather positive figures: after losing another 87,000 unemployed in October (MoM, but +556,000 YoY) or -0.2% to 2.760m unemployed to an overall rate of 6.0%, the unemployment rate fell further, shedding some 61,000 to „only“ 2,699m unemployed to a rate of 5.9%. German corporate insolvencies – again no surprises here – continued their freefall with another mindblowing, although, with „only“ -35 % (YoY) in November 2020 in comparison to the -45.8 % (!)(YoY) of opened procedures in October 2020, a somewhat „stalled“ speed. For the first nine months of 2020 the final figures are a little less scary, but with a decline of corporate insolvencies of over 13% in this period despite the biggest economic crisis since WWII, this is still a spectacular view to behold.

The leading German sentiment indicators, also seem to anticipate the consequences of the next lockdown: the German (Industrial) Purchasing Managers’ Index (PMI), lost a moderate 0.4 points and ended at 57.8 points on 1 December 2020. Also, the ZEW Indicator (for the current situation) – after gaining 6.7 points to -59,5 points in October lost another some 4,8 points and ended at -64.4 points in November 2020. The Ifo business climate index, which had already fallen from 93.4 points in September 2020 to 92.7 points in October 2020 continued its decline and fell further to 90.7 points in November 2020.

To sum up: While the „hard“ indicators of industrial orders, production, exports and unemployment still signal a recuperating Germany economy, the sentiment indicatorts alread show the (downward) way for the next months. It is hard to imagine that – given the hard lockdown now being implemented throughout Europe – the economy will really gain traction until the spring. Currently, the ones who predicted a „W-shaped“ recovery probably have a field-day or two….

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