The German economy in June 2021 – a relaxed summer, but…

The overview of the German economy in the previous months always transported some sort of optimism, however, also always with some pessimistic connotation (cf. for the last issue, here). And also for June 2021 this type of „cautious optimism“ continues. But, hey, let’s take a more detailed view:

Although no hard facts are known yet about the development of Germany’s GDP in the second quarter of 2021, but the experts rise their forecasts: The EU-Commission foresees a GDP-growth of 3.6% in 2021 and even 4.6% in 2022 for Germany (here), while the IMF shares the view of the Commissionr regarding 2021, but is a little less optimistic for 2022, where it only allows for a growth of 4.1% (cf. here).

The German DAX, starting at 15,567 points on 1 June, followed another zig-zag-course (rather sideways) and ended at 15,690 points on 30 June2021, thus gaining 123 points in the course of the month.

German industrial orders took a turn to the worse, at least on a monthly comparison: after a growth of +1.5% (MoM) in March, another +2.9% (MoM) in April, the orders on the books decreased by -3.7% (MoM), but increased by an unbelievable +54.3% in a year-over-year-comparison, in May 2021. However, Germany’s industrial production, which took a turn to the positive with an increase of +2.5% (MoM, even +5.1% YoY) in March, but already decreased by -1.0% (MoM) in April now took another, though smaller, hit with a -0.3% (MoM) in May 2021 Furthermore, German exports, though, continued their moderate growth of the previous months with +1.2% (MoM, and even +16.1% YoY!) in March, +0.3% (MoM) in April and again +0.3% (MoM) in May 2021. 

The German Target 2 balance added some Euro 26bn to its Euro 1,076bn in the previous month and ended at roughly 1,102bn at the end of June 2021. The rise of the German inflation-rate seems to be on a trajectory , though a little subdued now: from a negative -0.3%, in December 2020 and a respectable 1.0% in January to 1.3% in February to 1.7% in March to 2.0% in April to 2.5% in May and now to 2.3% in June 2021 (each MoM). 

The German labor market, in contrast, continued its positive trajectory and after 6.3% of the workforce being unemployed in February, 6.2% in March, 6.0% in April and 5.9% in May, the number of unemployed further fell by -73,000 (MoM; -239,000 YoY (!)) to 2.614m or 5.7% of the workforce being unemployed in June 2021. The number of (applications for the commencement of) corporate insolvencies in Germany continued its free-fall rather unabeted and, after decreasing by -31.1% in January, another -21.8% in February, a further decline of -5.6% in March (YoY, translating into a decrease of -19.7% for Q1/21) now declined by another -9% (YoY) in April 2021.

The leading German sentiment indicators, are – finally – now in (positive) sync: While this month the German (Industrial) Purchasing Managers’ Index (PMI), slighthly rose by 0.7 points and ended at 65.1 points on 1 July 2021, the ZEW Indicator (for the current situation), after already gaining several points in the the last months, took a sharp upward turn, gaining 31 points from -40.5 points in June, thus ending at -9.1% in July 2021. Also, the Ifo business climate index improved from 99.2 points in May to 101.8 points in June 2021.

To sum up: The feeling on / in / of the German economy seems to be more optimistic than warranted by the core „hard“ figures of orders, production and exports – which are currently all southbound. However, we should not forget that it’s summer – holiday-time. Hence, the (slight) downward trend might well be attributed to people taking long-awaited holidays. So, let’s hope for the best and see whether these hard facts will rise in autumn – or whether they will bow to another corona-induced lockdown (Delta, anybody?). Anyway, we cannot really do anything about that – so let’s at least relax over summer.

Keep calm & carry on!

Volker Beissenhirtz

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