The German economy in April 2019 – Recovery! Really?

The silver lining at Germany’s economic sky anticipated in my March monthly (here) got even brighter in April 2019. But, as we will see in the following, the positive development hinges on particular factors, which might not last long. But let’s go through the data in the usual order:

After dismal data in the previous months (-0.2% in the third and 0.0% in the fourth quarter of 2018), Germany’s GDP somehow managed to achieve a stunning 0.4% growth in the first quarter of 2019. However, as exports still did not grow (see below), the growth is mainly attributed to (crazy) building activities and general consumerism (cf. here for further details).

The German DAX followed the growth-story: After closing at 11,525 points on 29 March 2019 (here), it stated climbing nearly uninterrupted, gained 819 points and ended at 12.344 points on 30 April 2019. What a rebound! Or is it a dead-cat bounce?

Also in March 2019, German exports kept on gaining with another 1.9% gained another ((YoY); compared to February: 3.9%; January: 1.7%; December: -4.5%, November: 0.0%, October: +8.5%, September -1.2%, August: +2.2%, July: +7.6% (all YoY)). And: while exports lost on a monthly basis in the last months, they also grew by 1.5% in March 2019. Hence, overall, German exports grew constantly since the start of the year – despite the current trade-wars. Or, because of it? The reason for this growht might be a stock-piling before tariffs hit rather than “organic” growth. The next months will show. The (corresponding) German Target 2 balance, after gaining an incredible Euro 69 Billion (!) in February, lost Euro 22 Billion and fell from Euro Euro 941 Billion in March to 919 Billion in April 2019. The German inflation-rate, coming out at 1.3% (YoY) in March rose to 2.0% in April 2019.

Germany’s industrial production registered a further decline in March 2019 on an annual basis with -0.9% (YoY), while again gaining on a monthly basis (+0.5% MoM)). Hence, on an annual basis there is a constant decline in production since December 2018 (December 2018: -0.4% (MoM) / -3.9% (YoY), January: -0.8 (MoM) / -3.3 (YoY), February: +0.7 (MoM) / -0.4 (YoY)). German industrial orders, after already tanking in February with -4.2% (MoM) and -8.4% (!) YoY, fell further on an annual basis with +0.6 (MoM) and -8.1% (!!!) (YoY) in March 2019 (after -2.6 (MoM) / -3.9 (YoY) in January 2019, -1.6% (MoM) / -7.0% (!!!; YoY) in December and -0.2% (MoM) / -3.4% (YoY) in November 2018). This is the very definition of a crash, I would say – however, German MSM are rather mute about this development.

Again, the German unemployment-rate fell by another -72,000 (MoM) and -157,000 (YoY) to 2.301m, or 5.1% in March 2019. German corporate insolvencies, after rising by 5.7% in January, lost another 2.8% in February 2019, hence rather resumed their downward trend of the previous years. Prominent turnaround boutiques’ surveys. though, point to already rising restructuring activities.

The leading German sentiment indicators were not in sync in March: the German (Industrial) Purchasing Managers’ Index (PMI) seems to plateau on a low basis now, and slightly inceased from 44.1 points on 1 April to 44.4% on 1 May 2019. The estimates on the current economic situation, according to the ZEW Indicator, further tanked in April: After the loss of 3.9 points from 15.0 points in February to 11.1 points in March, the index shed another 5.6% in April 2019 and now stands at 5.5% (however the outlook is improving at least). Also, the Ifo business climate index, after posting a gain from 98.5 points in February to 99.6 points in March, resumed its decline again in April with only 99.1 points in April 2019.

To sum up: The German GDP is growing again, thanks to (overpriced?) construction activities and consumerism, German exports are gaining (despite or because of trade wars), while industrial productions is declining since months and industrial orders are TANKING. The DAX and unemployment – as lagging indicators – are still strong, though. The sentiment among German managers is dire – though spangled with some optimism – but this might also prove to be zweckoptimismus….

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