In the last overview about the German economy for August 2021 I was – given the more than „mixed“ data – already wishing for a better autumn (here). So, hey, let’s take a more detailed view on the further development:
After the dismal figures on Germany’s GDP-growth in the second quarter of 2021 (+1.5% (QoQ), after a decline of -1.8% (QoQ) in the first quarter of 2021), the outlook for the rest of 2021 further deteriorated……
The German DAX, starting at 15,568 points on 2 August, climbed up to 15,977 points on 13 August and then – as in the previous months – followed a zig-zag-course downwards before ending at 15,835 points on 31 August 2021, thus gaining solid 267 points in the course of the month.
German industrial orders continued their strong rebound also in August: after a growth of +1.5% (MoM) in March, another +2.9% (MoM) in April, a decline by -3.7% (MoM), but unbelievable +54.3%(YoY) in May and by 4.1% (MoM) and 26.2% (YoY) in June, the grew by another +4.6% (MoM) and 26.5% (YoY) – wich, according to Destatis is „at the highest level since the beginning of the time series in 1991 and 15.7% above the pre-crisis level“. And, finally, Germany’s industrial production, is gaining momentum, too: after a decrease by -1.0% (MoM) in April, by a further -0.3%(MoM) in May and -1.3% (MoM; though +5.1% (YoY) in June, before now turning north with +1.0% (MoM) and even +5.4% (YoY). There against, German exports, although continuingtheir moderate growth with +0.5% (MoM and 12.4% (YoY) in August 2021 (after +1.2%(MoM, +16.1% YoY!) in March, +0.3% (MoM) in April, again +0.3% (MoM) in May and +1.3% (MoM; and even +23.6% YoY) in June 2021), are not really getting off the ground.
The German Target 2 balance gained some moderate Euro 12bn during the course of the month and ended at roughly 1,037bn at the end of August 2021. Again, the German inflation-rate has increased again: from 1.0% in January to 1.3% in February, to 1.7% in March, to 2.0% in April, to 2.5% in May, to 2.3% in June, to 3.8% in July and now to 3.9% in August 2021 (each YoY).
The German labor market, although somewhat stalling, after an unemployment rate of 5.7% in June and 5.6% in July and now the same rate in August 2021 – but one has to keep in mind that August was still in the holiday season. The number of (applications for the commencement of) corporate insolvencies in Germany continued its free-fall, though with a somewhat lesser velocity: after decreasing by -31.1% in January, another -21.8% in February, a further decline of -5.6% in March (YoY), another -9% (YoY) in April and another unbelievable -25.8% (YoY) in May, corporate insolvencies decreased by another -11.6% (YoY) in June 2021, making for an overall decrease of -17,7% in the first half of 2021.
The leading German sentiment indicators remain „de-synced“ in August: While this month the German (Industrial) Purchasing Managers’ Index (PMI), fell by 3.2 points and ended at 62.6 points on 2 August 2021, the ZEW Indicator (for the current situation) gained another 5.6 points and went from -40.5 points in June, -9.1% in July and +21,9% in August 2021 to +27.5 points in September 2021. Meanwhile, the Ifo business climate index further declined, from 101.8 points in June and 100.8 points in July to now 99,4 points in August 2021.
To sum up: Being lazy, I could just repeat the summary of my July’s monthly:
„While incoming orders and exports seem to be on a good way, production – with its obvious problems in the supply chain – remains a source of concern for the German economy. And this bottleneck of supply is probably responsible for most of the increasing inflation. Given the continued problems with chinese and other harbours, this problem will probably also not go away in the short term, at least. Hence, it is foreseeable that it will take its toll – either by cutting production or increasing prices, or both (!). Keeping these circumstances in mind, the curent forecast of a 3.x% growth of the German economy (which is not really outstanding compared to other economies) seems already ambitious, even before taking into account any new problems related to Corona or any fallout from the Taliban’s victory in Afghanistan. So, let’s hope for a better autumn…„
And, well, that’s the point: Although all three „hard“ German KPIs (orders, production, exports) are now well in the positive, the sentiment among German managers is not the best, and not really getting better. Hence, I guess that the above quote might be put under the coming monthlies as well… Let’s hope not.