The German economy in April 2022 – slow recognition

In April 2022 the war in Ukraine (for regular updates, cf. here, in German) was also dominating the economic headlines in Germany, while Corona slowly faded from the front pages. After the reality of the war and other factors hindering a swift ecomic upturn had seemingly set in with the German economy in March 2022 (here), the question is how it fared in April. So, let’s take a closer look:

In the first quarter of 2022, the German GDP grew by a mere 0.2%, but is still 0.9% below its pre-pandemic levels. This rather meagre growht underpins the forecast of the „Wirtschaftsweisen„, who predicted a GDP-growth of 1.8% only in 2022 (here).

After its „crack-up-boom“ (cf. here for further explanations, in German) the German DAX zig-zagged its way downwards from 14,446 points on 1 April to, first, 14,502 points on 21 April, before going down to the month’s low with 13,756 on 26 April, finally settling at 14,097 points on 29 April 2022.

German industrial orders retook their upward trend and, after declining by -2.2% (MoM; +2.9% YoY) in February, they rebounded by 0.6% (MoM; and even 20.7% YoY) in March 2022. According to a study of the Ifo-Institute, the order backlog among Germany’s manufacturers is currently at a record high (here), too. Therefore, the next downturn in Germany’s industrial production, which had zig-zagged in the previous months already, and declined by -3.9% (MoM; -3.5% YoY) in March 2022, should probably be taken with a pinch of salt – at least regarding the short-term outlook. Also, German exports,which had skyrocketed by +6.4% (MoM; and even +14.3%) in February, declined by -3.3% (MoM, but +8.1% YoY) in March 2022. 

The German Target 2 balance, lost certain Euro 34bn in the course of April 2022 and ended at Euro 1,135bn. The German inflation-rate, at least moderated the pace of its relentless rise a bit: starting from 1.0% in January (2021) 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, to 5.2% in November and to 5.3% in December 2021, 4.9% in January, 5.1% in February to 7.3% in March and now to 7.4% in April 2022 (each YoY). My forecast still stands that we will see two-digit inflation rates in June 2022 at the latest.

Again, despite all the turmoils, the German labor market kept its robustness d and – after 5.3% in February and 5.1% in March, the unemployment-rate fell further to 5.0% in April 2022. Corporate insolvencies in Germany, continued their zig-zag-course of the previous months and, after stark rise of the early-warning indicator of all insolvency-filings (thus including corporate insolvencies) by by 27% in March, this indicator declined again by -20.8% in April 2022 (see my comment here, in German).

The leading German sentiment indicators finally succumbed to the realities of the world at war and „re-synced“ in their decline: the German (Industrial) Purchasing Managers’ Index (PMI) lost another 2.3 points and further decreased to 54.6 points on 2 May 2022. Also, the ZEW Indicator (for the current situation) lost another -9.4 points and, after -7.4 points in January, -8.1 points in March and -21.4 points in April decreased to -30.8 points in May 2022. The Ifo business climate index, being one month behind the other two, stabilised at 91.8 points in April 2022 – after 95.7 points in January, 98.9 points in February and 90.8 points at the end of March.

To sum up: Again, despite the generally negative outlook for the German economy, the actual figures – especially regarding the order-books of German enterprises and the labour market – are not really bleak. However, this positive image is somewhat watered down not only by the still rising inflation figures but also by (global) figures on auto-sales (cf. here for the current situation, in German). Still, the DAX is, despite its losses, in la-la land. So in total, reality is still only slow setting in with the German economy. This carries the risk that enterprises and entrepreneurs start too late to prepare for an all-encompassing downturn.

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