The German economy in November 2021 – winter does not look too good either

The German economy did not look too good in October 2021 (here), hence the question remained, would it get better in November? So, let’s take a more detailed view on the November figures to answer that question:

After the the five wise (wo)men („Fünf Wirtschaftsweise„), had already lowered their forecast for 2021 to a GDP-growth of only 2.4% in 2021, the Bundesbank even seeing a stall in economic growth in the fourth quarter of 2021(here), the incoming growth figure of only 1.8% growth for the third quarter 2021 seems to prove the point.

The German DAX, reached a new record in the course of November, starting at 15,806 points on 1 November, reaching a record-high of 16,251 points on 17 November, before crashing by 1,151 points (!!!) and ending at 15,100 points on 30 November 2021.

German industrial orders currently seem to be in a zig-zag-mode: After a crash of -7.7% ((!) MoM; but growth of 11.6% YoY) in August, but a growth by +1.3% (MoM; +9.7% (YoY)), incoming orders again fell by -6.9% (MoM, but also down -1.0% YoY) in October 2021. Again, There against, Germany’s industrial production, which crashed by -4.0% (MoM; +1,7% (YoY)) in August and lost another -1.1% (MoM, but +1.0% (YoY)) in September, now gained 2.8% (MoM, -0.6% YoY) in October 2021. Also, German exports,which had declined by -1.2% (MoM, but +14.4% (YoY)) and by -0.7% (MoM, yet still +7.1% YoY) in September now gained a considerable +4.1% (MoM, even +8.1% YoY) in October 2021. 

The German Target 2 balance gained another some Euro 61bn compared to October ended at roughly 1,127bn at the end of November 2021. The German inflation-rate speeds on, too: 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, to 3.9% in August, to 4.1% in September, to 4.5% in October and now to 5.2% in November 2021 (each YoY). It remains to be seen whether these high inflation rates will subside.

The German labor market, now despite the stark increase in corona-cases in Germany, still remained robust and – after an unemployment rate of 5.7% in June, 5.6% in July, the same rate in August, 5.4% in September, 5.2% in October – the unemployment rate fell by another -0.1% to 5.1% in November 2021. Rather needless to say that corporate insolvencies in Germany continued their decline: after decreasing by -31.1% in January, -21.8% in February, -5.6% in March, -9% in April, -25.8% in May, -11.6% in June, -12.3% in July and by „only“ -2,1% in August, the „speed“ of the decline further decelerated and the number of corporate insolvencies fell by only -1.9% in September 2021 (all YoY). But not only the „deceleration“ in the decline is interesting (translating into an overall decline of -14.5% in the first three quarters of the year), rather eye-popping is the fact that the number of applications for the commencement of regular insolvency proceedings (which include corporate insolvencies) climbed by an unbelievable 43.8% in November 2021 compared to the previous month. The question is whether we can observe the reversal of a trend here or whehter it is another one of these statistical glitches. The coming months will tell us, I am pretty sure.

The leading German sentiment indicators were in sync in November 2021 – again with a downward trend: While the German (Industrial) Purchasing Managers’ Index (PMI), fell by another -0.4 points and ended at 57.4 points on 1 December 2021, the ZEW Indicator (for the current situation) lost another 9.1 points points and went from -40.5 points in June, -9.1% in July, to +21,9% in August, to +27.5 points in September, to +31.9 points in October, to +21.6% in November and now to +12.5% in December 2021. Meanwhile, the Ifo business climate index declined further, from 101.8 points in June and 100.8 points in July to 99,4 points in August, to 98.8 points in September, to 97.7 points in October and now to 95,5 points in November 2021.

To sum up: Without too much fuss about my own – proper fitting – predictions of the summer (here) I add further water to the already watered-down wine of the current state of the German economy by stating that the new German government in place since last week will most probably face a declining economy in the coming months: Due to the corona-restrictions, christmas shopping will mostly happen online, hence further stretching the already stretched-out retail-budgets. The same goes for the restaurant-sector which is now faced with restrictions which come close to those of a proper lockdown. The remaining hope is that the German (export-driven!) economy will stay strong – despite the bumper in industrial orders. Given the rising inflation (which will translate into higher wages, I am pretty sure), the insecurity sorrounding the incoming Omicron-wave of Corona and the deteriorating political situation in the Ukraine as well as in sino-american relations, the risk is high, though, that also this pillar begins to tumble. Hence, after a not very good autumn it stands to fear that the winter will not get any better.

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