It is getting quite boring to announce record after record in the German economy: From DAX to employment and from industrial output to ifo – record-highs everywhere. We Germans are not accustomed to such a lengthy period of record-growht. There are, however, not many pessimists left now who are willing to predict any sort of crisis. And I am currently at least not one of them. First, let’s look into the German economy with the help of several key indicators:
The German DAX is seemingly in the middle of its autumn-Hausse: After closing at 12,828 points on 29 September the index gained over 400 points and closed at a record of 13,229 points on October 30th 2017. Hence, as predicted in the last month, the rally has gone on – and will go on until December – fueled by dovish stances by the CB’s all around the world.
According to figures released early October, German exports in August 2017 (latest available figures) increased by another 7.2% on a YoY-basis (after 8.0% in July). In reversing the trend of declining the German Target-2-balances in previous months, the balance increased by Euro 27bn from Euro 852,5 bn in August to a new record of Euro 879bn in September 2017 (cf. here). That is a rise which should make us stop and think a little bit about „trade-imbalances“.
In accordance with the otherwise beautiful figures (I cannot state it otherwise), the German unemployment-rate further decreased from 5.5% in September to 5.4% in October 2017, the number of unemployed now being below 2.4m. However, the job-market indicator for comptroller, accountants and bookkeepers is declining, maybe a first sign of stagnation?
The German inflation-rate slightly decreased from 1.8% in September to 1.6% in October 2017 (MoM). Given the dismal harvesting data in Germany and worldwide (Irma for example destroyed a lot of the orange crop (cf. here)), I recon that the inflation rate will at least stay on this level, but rather will further rise.
Corporate insolvencies in Germany are in free fall now – with a nearly 10-percent decline in July 2017.
After stagnating in July, Industrial production in Germany increased by 2.6% in August 2017. Also, new orders again increased by 3.6% in August 2017 (MoM). Also, the managers see into a rosy future (at least for the coming months): The German (Industrial) Purchasing Managers‘ Index (PMI) remained unchanged at 60.6 points in October 2017. However, Car sales in Germany (and Europe) fell by 3.3%, after a very strong August and against the background of „diesel-gate“.
The Ifo business climate index, too, rose from 115.2 points (seasonally adjusted) in September to a new record high of 116.7 points in October 2017. According to Ifo’s press release „Companies are very optimistic about the months ahead. They also upwardly revised their very favourable assessments of the current business situation. Germany’s economy is powering ahead.“ The ZEW Indicator lost 0.9 points, though, from 87.9 points in September to 87 points in October 2017.
Again, as predicted in the previous month (cf. here), the October figures are indeed better than the September figures. And again, I predict that absent a new political crisis (Korea, anybody?) the figures in November will be better than the ones in October. That speaks volumes of the (non-) essence of a functioning government: „Jamaica“ is – six weeks after the elections – still discussing the basics of a potential coalition and a new government will surely not be in place before next year – if at all.