After the reality of the war in Ukraine (for regular updates, cf. here, in German) has set-in in Germany, making for a mixed (economic) bag in April (cf. here) the question is how the German economy fared in May 2022. So, let’s take a closer look:
While the German GDP grew by a mere 0.2% in the first quarter of 2022, the Bundesbank still forecasts a GDP-growth of 1.9% for 2022 which is in line with the „Wirtschaftsweisen„, who predict a GDP-growth of only 1.8% (here). However, a recent survey of Finance Magazine rates the probability of an actual recession as rather high (here).
Meanwhile (given the current crash in June), the German DAX seems to have undergone a further „crack-up-boom“ in May 2022, zig-zagging its way upwards from 13,996 points on 2 May to the low of 13.739 points on 12 May, before ending the month with 14,575 points on 31 May 2022.
German industrial orders did not follow the upward trend of last month and, after declining by -2.2% (MoM; +2.9% YoY) in February, rebounding by 0.6% (MoM; and even 20.7% YoY) in March, the again declined by -2.7% (MoM; -6.2% YoY) in April 2022. Germany’s industrial production, which had declined by -3.9% (MoM; -3.5% YoY) in March now rose by 0.7% (MoM, but -2.2% YoY) in April 2022. Also, German exports,which had skyrocketed by +6.4% (MoM; and even +14.3%) in February but declined by -3.3% (MoM, but +8.1% YoY) in March again sharply increased by +4.4% (MoM, and even +12.9% YoY) in April 2022.
The German Target 2 balance, rose by a certain Euro 24bn in the course of April 2022 and ended at Euro 1,159bn. The German inflation-rate, again accelerated the pace of its relentless rise in May: 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 (2022), 5.1% in February, 7.3% in March, 7.4% in April and now 7.9% in May 2022 (each YoY). My forecast that we will see two-digit inflation rates in June 2022 might prove to be too pessemistic, but we are getting closer.
Again, the German labor market kept its robustness also in May and – after 5.3% in February, 5.1% in March and 5.0% in April – the unemployment rate fell to 4.9% in May 2022. In fact, these shortages in the labor force are identified as one of the key-concerns of entrepreneurs (here). Corporate insolvencies in Germany, again, continued their zig-zag-course of the previous months and, after a stark rise by 27% in March, followed by a near-equal stark decline by -20.8% in April 2022, the index rose again by 8.4% in April 2022 (see my comment here, in German).
Despite the rather mixed economic figures, the leading German sentiment indicators ROSE in sync: the German (Industrial) Purchasing Managers’ Index (PMI) slighty rose by 0.2 points and stood at 54.8 points on 2 May 2022. Also, the ZEW Indicator (for the current situation) lost another -5.7 points and decreased to -36.5 points in June 2022. The Ifo business climate index, slightly rose and ended – after 91.8 points in April – at 93.0 points in May 2022.
To sum up: The „hard“ KPI of the German economy – orders, production and exports as well as the labor market – do not look too bleak. But the outlook gets bleaker by the month – as witnessed by the downgraded outlook for the whole year as presented by the Bundesbank and the „Wirtschaftsweisen„. Hence, with a view to the current carnage at the stock-markets globally, it seems probable that not only the DAX went for a „crack-up-boom“ in May. As already stated at the end of April, there is a serious risk that the reality of a deteriorating economy are too slow perceived. Hence, the risk that enterprises and entrepreneurs start too late to prepare for an all-encompassing downturn, might again have increased with the not-so-bad figures of May. Hope and optimism might be unwarrranted this time.