After being too optimistic in March (here), realising that we have seen the best (for 2023) already (here) in April and that the German economy seems to go south with astonishing speeed in May (here), the fearful look goes to the June figures. So, let’s take a closer look at the stalling German economy:
While institutions like the OECD see a contracting German GDP (here), of all things, the conservative Deutsche Bundesbank sees light at the end of the tunnel and foresees a little growth in the second quarter of 2023 (here), unsurprisingly disputed by other pundits (cf. only here and below).
Following the uncertainties in the German economy, the German DAX undertook a roller coaster-ride in June: from 15,744 points on 1st June to yet another ATH of 16,306 points on 16 June before ending the month at 15,940 points.
German industrial orders increased significantly: after cratering in March 2023 with -10.7% (MoM, -11.0% YoY) and decreasing by another 0.4% (MoM, -9.9% YoY) in April, they recovered by +6.4% (MoM, – 4.3% YoY) in May 2023. There against, Germany’s industrial production slightly declined again: after -3.4% (MoM, but +1.8% YoY) in March, 0.3% (MoM, 1.6% YoY) in April, production declined by -0.2% (MoM, +0.7% YoY) in May 2023. Also, German exports again reversed their previous upward trend, after -5.2% (MoM, but +5% YoY) in March, 1.2% (MoM, 1.5% YoY) in April, exports decreased sligthly by -0.1% (MoM, -0.7% YoY) in May 2023. For other German KPI’s, I again refer you to the „Destatis Deutschland-Dashboard“ (here).
The German Target 2 balance slightly declined by Euro 13bn in June 2023 and ended at Euro 1,068bn. The German inflation-rate again INCREASED in June 2023: 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 started to decrease, first to 10.0% in November and further to 8.6% in December 2022, again increased to 8,7% in January (2023), where it remained (8.7%) in February, before slumping down to „only“ 7.4% in March and to 7.2% in April, before now „crashing“ to 6.1% in May, the inflation rate went up again to 6.4% in June 2023 (each YoY, my most recent comment here, in German).
Finally, the German labor market seems to at least begin to mirror the rather meagre situation of the German economy, the unemployment rate – after 5.7% in March, also 5.7% in Apri and 5.5% in May – remains unchanged in June 2023 with 5.5%. However, unemployment figures slightly increased and the comments from the Bundesagentur are also not really encouraging: „The more difficult economic conditions are now also being felt on the labor market: unemployment is rising and employment growth is losing momentum.“ German insolvency filings, also seem to take heed of the less positive economic climate: After declining by -14.1% in April, figures already increased by 3.1% in May and now by 13.9% in June 2023 (all MoM; cf. my most recent comment, here, in German)!
The leading German sentiment indicators were in (a downward) sync in June2023: The German (Industrial) Purchasing Managers’ Index (PMI) lost another 2.6 points and stood at 40.6 points on 3rd July 2023. The ZEW Indicator (for the current situation) for June 2023 crashed by 21.7 points and stands at -56.5 points. Also, the ifo Business Climate Index, lost another 3 points and ended at 88.5 points in June 2023.
To sum up: I really do not understand the Bundesbank’s optimism with nearly all hard KPIs and all sentiment indicators pointing more or less sharply south. Rather I agree with the German „wise (wo-)men of the economy“ („Wirtschaftsweise„) who all revised their forecasts downwards (here, in German) and Politico’s view which paints a much darker picture of the German economy’s future (here). The German economy is stalling. And it doesn’t look like it’s the usual summer break and it will re-ignite after the holidays. Rather I think that the German economy will continue it’s decline, albeit not in a straight line, throughout the next years.