Due some work-related journeys through Europe, this monthly is a little late in the month. Unfortunately, the picture of the German economy in August does not really get better with temporal distance. But, hey, let’s take a closer look on how the German economy fared in August 2024:
After the less than positive German GDP-data of last month, the German Ministry of Economics and Climate issued an at least relatively sober statement as to the current status of the German economy (here, in German, still some data conflict with the „hard KPI“ I list below). However, like the Bundesbank in the previous month (again here), the Ministry too insists on a more positive consumer climate to serve as driver for some growth until year end.
I will therefore add the GFK-consumer index to my selection of sentiment indices since German consumers seem – according to the pundits – to be the (only?) factor from which an implulse for growth may come. Well, let’s see (below).
The German DAX price index (for an explanation, why I prefer this index, cf. here) crashed from end July through to 5th August, starting at 7,110 points on 31st July then fallling strongly before stabilising at 6,661 points, thereby losing 450 points before reaching 7,263 points on 30th August 2024, hence gaining over hundred 150 points over the month – but with a high volatility.
And the surprises continued, at least regarding the German industrial orders again exceeding expectations: after continually decreasing since March, first by -0.4% (MoM, -5.8% YoY) in March, by another -0.2% (MoM, still -1.6% YoY) in April and by another -1.6% (MoM, even -8.6% YoY) in May, orders first increased by +3.9% (MoM, but still -11.8 YoY) in June and then again by +2.9% (MoM and also by +3.7% YoY) in July 2024. Unfortunately, though, Germany’s industrial production was not able to continue ist upward trend: after decreasing by -0,4% (MoM, even -3.3 YoY) in March, -0.1% (MoM, -3.9% YoY) in April and even by –2.5% (MoM, -6.7% YoY) in May, production rose by +1.4% (MoM, but still -4.1% YoY) in June, but again decreased by a considerable -2.4% (MoM, even -5.3% YoY) in July 2024. There against, German exports increased: after increasing by 0.9% (MoM, +1,2% YoY) in March and 1.6% (MoM, 1.9% YoY) in April, exports decreased by -3.6% (MoM, -1.6% YoY) in May 2024 and by another -3.4% (MoM, even 4.4% YoY) in June before increasing by +1.7% (MoM, but still -1.2% YoY) in July 2024. For other German KPI’s, I refer you to the „Destatis Deutschland-Dashboard“ (here) and the „Data Commons (Germany)“ (here).
The German Target 2 balance increased by roughly Euro 27bn in July 2024 and ended at Euro 1,075bn. The German inflation-rate decreased below the 2%-threshold for the first time since March 2021 (!): starting from its peak of 10.4% in October 2022, the rate started to decrease, first to 10.0% in November, 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 7.4% in March and to 7.2% in April, before „crashing“ to 6.1% in May, going up again to 6.4%, decreasing to 6.2% in July and to 6.1% in August, even to 4.5% in September, to 3.8% in October and 3.2% in November, before re-climbing to 3.7% in December 2023, re-decreasing to 2,9% in January 2024, 2.5% in February and to 2.2% in March , where it remained (2.2%) in April, increasing to 2.4% in May, decreasing to 2.2% in June, increasing again to 2.3% in July before reaching 1.9% in Augst 2024 2024 (each YoY).
The German Labor market is gradually but steadily further degrading; the unemployment rate, which stood at 5.8% in June, rose to 6.0% in July and 6.1% in August 2024 (all MoM). The accompanying comment („‘The labour market continues to feel the effects of economic stagnation. Unemployment and underemployment increased further during the summer break’„) does not make for an optimistic outlook for the autumn, too (cf. also here, in German. German insolvency filings increased for the 16th time in a row and again in the two-digits: After 3.1% in May, 13.9% in June, 23.8% in July, 13.8% in August, 19.5% in September, 22.4% in October, 18,8% in November and 12.3% in December 2023, 26.2% in January, 18.1% in February, 12.3% in March, 28.5% in April, 25.9% in May, a „mere“ 6.3% in June, 13.5% in July and 10.7% in August 2024 (all YoY; cf. my most recent comment, here, in German – corporate insolvencies decreased by 9%, though only on a MoM-basis).
The leading German sentiment indicators, were, once more, in sync: The German (Industrial) Purchasing Managers’ Index (PMI) lost a further 0.8 points and stood at 42.4 points on 2nd September 2024. The ZEW Indicator for business expectations lost a staggering 22.6 points and sank to 19.2 points in August 2024. Finally, the ifo Business Climate Index lost another 0.4points and ended at 86.6 points in July 2024. The GfK-consumer index, which rose in July by 3.2 points to -18.4 points lost 3.4 points in August and ended at (revised) -22.0 points.
To sum up: While the „hard“ KPIs of still orders and exports increased in July (!), all „soft“ KPI, namely the sentiment-indices for August (!) already tell a very different story – the downswing continues. And while Mr. El-Erian ist still optimistic for the western economies (here), the German Bundesbank makes it abundantly clear that this optimism may not include the German economy (here). And commentators in German magazines increasingly paint a rather bleak picture regarding Germany’s economic future (Focus here, Wiwo here, in German). Also, the dependence on China now becomes a matter of public debate (here, in German) – probably too late. At least, the „greedflation“ of some companies is addressed as well (here, in German).
Already at the end of August it was thus apparent that Germany is far from doing well economy-wise. While the recessionary tendencies might effectively put a definite end to the already weakening inflation, the increasing unemployment rate and incessantly rising insolvency figures already mirror the skidmarks of the German economy. Frustratingly, there are also no signs for a reversal of this downward trend and an autumn upswing yet – especially not from the consumer-side.