legonomics

Just after I sent out my last monthly (here), Destatis announced that at least in the third quarter, Germany’s economy experienced a slight growth (here). So, not all is bad in Germany? Well, let’s see and take a closer look on how Germany’s economy fared in October:

Although the German GDP actually did grow by 0.2% in the third quarter, pundits already claimed that this is rather an exceptional spike than reversal in the overall trend (here, in German). Indeed, the „five wise economic (wo-)men“ („Wirtschaftsweise„) acknowledged recently that economic growth will be negative in 2024 and sluggish in 2025 (here, comment here, in German).

The German DAX price index (for an explanation, why I prefer this index, cf. here), did lose some ground in October and also „enjoyed“ a nice roller coaster ride, starting at 7,381 points on 1 October, crashing again first (like in the previous months) to 7,305 points on 3 October already, before rising strongly to 7,551 points on 18 October, then entering the next volatility cycle, ending the month lower at 7,329 points.

German industrial orders surprisingly gained some ground again: 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 then increased by +3.9% (MoM, but still -11.8 YoY) in June and by +2.9% (MoM and also by +3.7% YoY) in July, declining by -5.8% (MoM, -3.9% YoY) in August, before gaining 4.2% (MoM, also +1.0% YoY) in September 2024. There against, Germany’s industrial production lost it’s momentum again: 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, again decreased by -2.4% (MoM, even -5.3% YoY) in July, before again increasing by 2.9% (MoM, but -2.7% YoY) in August, production sank by -2.5% (MoM, even -4.6% YoY) in September 2024. Also, German exports shrank – at least on a monthly basis: 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 and -3.4% (MoM, even 4.4% YoY) in June before increasing by +1.7% (MoM, but still -1.2% YoY) in July and now by a further 1.3% (MoM, +0.1% YoY) in August, they decreased by -1.7% (MoM, -0.2% YoY) in September 2024. Still, due to the growth in previous months, exports achieved a 0.5% growth in the third quarter of 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 lost roughly Euro 9bn in October 2024 and ended at Euro 1,064bn. The German inflation-rate stopped its decline: starting from its peak of 10.4% in October 2022, the rate decreased to finally 1.6% in September but has now increased to 2.0% in October 2024 (each YoY).

The German Labor market stalled in October: After the unemployment rate rose to 6.1% in August and declined slightly to 6.0% in September, it remained at 6.0% in October 2024 (all MoM). The Bundesagentur nails it: „The fall upturn in the labor market is largely absent this year.“ There are to this day (20 November) no new figures on German insolvency filings which had increased 17 times in a row until: 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,  10.7% in August and 13.7% in September 2024 (all YoY; cf. my then most recent comment, here, in German). I will hopefully be able to add these figures at a later stage.

The leading German sentiment indicators, were, all in sync: The German (Industrial) Purchasing Managers’ Index (PMI) gained 2.4 points and stood at 43.0 points on 4 November 2024. Also, the ZEW Indicator for business expectations gained 9.5% points and rose to 13.1 points in October 2024. Also, the ifo Business Climate Index gained 1.1 points and ended at 86.5 points in October 2024. Finally, the GfK-consumer index, also recovered slightly and increased by 0.2 points to 21.0 points in October 2024.

To sum up: The German economy – not doing so bad, after all? Looking at the sentiment indices, there seems to be some hope at least and probably the hard KPI (whose data lag behind) will mirror the better sentiment in a month’s time. However, this is the time when German economy usually booms („Herbstaufschwung“, „autumn boom“) – and this years boom definitely lacks the dynamic of former years. Hence, it will probably help for a softer landing of the German economy, but it should not be taken as a sign of an overall recovering economy. Too deep are the structural damges (inflicted by Mrs. Merkel, as The Economist suggests (here, comment here, in German)?), the processes of „degrowth“ and „de-industrialisation“ are running through the German economy (cf. here and here for comments, in German). And if the inflation should indeed raise its ugly head again, consumer confidence will melt away soon (and Mr. Fratzscher, here, in German, is not really helping when promoting a 4%-inflation target). Hence, the current partial upswing in the economy should be seen as proof to the proverbial „nothing goes to heck in a straight line“.