The German economy in November 2022 – have we really seen the bottom?

The war in Ukraine is still ongoin though there wasn’t too much actual movement throughout the month – probably due to Rasputitsa(for regular updates, cf. here, in German). The hope which came up last month as to the fate of the German economy (here) seems to somewhat stabilise now albeit on a low level. So, hey, let’s take a closer look on how the German economy fared in November 2022:

After Germany’s GDP, grew indeed by 0.4% in Q3/22, cautious optimism is now gaining track among German economists. The IFO-institute now forecasts a growth of the German economy by 1.8% in 2022 and a contraction of only -0.1% in 2023 (here). Deutsche Bank is somewhat more conservative and foresees a decline of the German economy by -1% in 2023.

We are indeed witnessing the longest and strongest „crack-up-boom“ in the history of crack-up-booms: The German DAX managed yet another incredible increase in November: Starting at 13,344 points on 1st November and closing the month at 14,429 points on 30th November 2022, the index gained another 1.085 points in the course of the month (after already gaining 1,303 points in October)).

German industrial orders recovered somewhat from their September delcine: after 0.7% (MoM, +12,6% YoY) in July, 0.3% (MoM, 11.1% YoY) in August and -0.9% (MoM, but +6.9% YoY) in September, they increased by 0.8% (MoM, but -3.2% YoY) in October 2022. There against, Germany’s industrial production, encountered a small decline in the same month after +0.4% (MoM, but -0.5% YoY) in June, -0.3% (MoM, -1,1% YoY) in July, another -0.8% (MoM, +2.1% YoY, though) in August, +0.6% (MoM, +2.6% YoY) in September, production decreased by -0.1% (MoM, and stalled (0.0%) YOY) in October 2022. German exports, too, were in a downward trend, after +4.5% (MoM, and even +18.4% YoY) in June, -2.1% (MoM, but still +14.3 YoY) in July, 1.6% (MoM, +18.1% YoY) in August and -0.5% (MoM, but incredible +20.3% YoY) in September, they declined by -0.6% (MoM, but +14.2% YoY) in October 2022. 

The German Target 2 balance, gained some Euro 4bn in the course of November 2022 and ended at Euro 1,234bn. The German inflation-rate, decreased but remained in the two-digit status: 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, after 7.9% in May, decreasing to „only“ 7.6% in May and even to 7.5% in June, increasing to 7,9% in August, to 10.0% in September and even 10.4% in October, the rate decreased to 10.0% in November 2022 (each YoY; cf. my most recent evaluation here, in German). The November figures for producer prices, are not out yet, but other indicators (contained in the above linked Destatis-article) point to a downward trend. Hence, my doutbts as to the „peak inflation“ stated last month might prove to be wrong.

Although unemployment rose by 117K, German labor market, remains robust, as the German Department of Labor reports; the unemployment rate – after 5.2% in June, 5.4% in July, 5.6% in August and 5.4% in September and 5.3% in October stayed at 5.3% in November 2022. (Applications to commence) insolvencies in Germany deviated from their normal well-known statistical zig-zag-pattern:after a decline by -7.6% in June, followed by another -4.2% decline in July and an increase by 6.6% in August, a crash by -20.6% in September, a „rebound“ by 18.4% in October, insolvency applications rose by another +1.2% in November 2022 (cf. my comment, here, in German).

The leading German sentiment indicators remained in sync for November (this time a good sign): the German (Industrial) Purchasing Managers’ Index (PMI) gained 1.2 points and stood at 46.2 points on 1 December 2022. The ZEW Indicator (for the current situation) which had lost another roughly 12 points in November and ended at -72 points, gained 7.7 point and increased to -64.5 points in December 2022. The ifo Business Climate Index rose to 88.6 points in December, up from 86.4 points (seasonally adjusted) in November 2022.

To sum up: Probably, I could copy/paste the core of my last commentsabout the economic development in Germany: „As I read this tea-leaves, mh, figures, though, there might be some cognitive dissonance in the air. I guess reality and sentiment will re-merge in the coming winter months.“ In contrast to last month, even production decreased and exports remain at negative levels, too. Hence, where does all the optimism come from? My uneducated guess is that chronic optimists mistake state aid-programs (in the value of around Euro 95m, here, in German) for a healthy growth rate. Beware the day of reconing!

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