After a non-happy ending to 2023 (here) and a not-promissing to 2024 (here), it seems that the roller-coaster. But, hey let’s take a more closer look at the German economy:
There are no new actual facts about Germany’s BIP development in 2024, but every institution is currently lowering its forecast (here). Hence, the chances to escape a recession in 2024 are getting already slim at this time of the year.
Meanwhile, the (in comparison to the DAX performance index) more modest German DAX price index (for an explanation, why I prefer this index, cf. here) continued its rally, starting at 6,671 points on 1. February, and ended significantly higher at 6,971 points on 29th February 2024, marking an ATH from around mid-month on a nearly daily-basis.
After two consecutive months of gains, German industrial orders slumped – hard: after gaining +0.3% in November 2023 (MoM, -4.4% YoY) and even 8.9% (MoM, +2.7% YoY!) in December 2023, orders decreased by -11.3% (MoM; -6.0% YoY) in January 2024. There against, Germany’s industrial production regained some: after -0.4% in October (MoM, -3.5% YoY), and -0.7% (MoM, -4.8% YoY) in November and -1.6% (MoM, even -3.0% YoY) in December 2023, production increased by +1.0% (YoY, but still -5.5% YoY) in January 2024. German exports again rebound: after +3.5% (MoM, but still -5.0 YoY) in November, -4.6% (MoM, equally -4.6% YoY) in December 2023, exports increased by +6.3% (MoM, +0.3% YoY) in January 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 34bn in February 2024 and ended at Euro 1,075bn. The German inflation-rate resumed its decline in January: 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, to 2,9% in January 2024 and now 2.5% in February 2024 (each YoY).
The German labor market remained stable: the unemployment rate – after 5.7% in September, also 5.7% in October, 5.6% in November and, again, 5.7% in December 2023, a jump by 0.4% to 6.1% in January, the unemployment rate remained unchanged at 6.1% in February 2024. German insolvency filings increased for the tenth time in a row: 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 and 26.2% in January, filings increased by another 18.1% in February 2024 (all YoY; cf. my most recent comment, here, in German)!
The leading German sentiment indicators, are, once more, not in sync: The German (Industrial) Purchasing Managers’ Index (PMI) lost 3.0 points and stood at 42.5 points on 1st March 2024. The ZEW Indicator (for the current situation) lost 4.4 points and was at 81.7 points in February 2024. There against, the ifo Business Climate Index, gained 0.3 points and ended at 85.5 points in February 2024.
To sum up: As Keynes famously put it: “Markets can remain irrational longer than you can remain solvent”. And that insight is not limited to stock-markets, for which Keynes stated the obvious at the time. The “unsync” of Germany’s “hard” KPI (orders, production, exports) alone would be enough for some head-sratching. However, beyond these short-term factors, the German economy faces serious structural issues but the stock-exchange goes for one ATH after another and the tax-income is still rising, too (here). Meanwhile the sinking inflation-rate does not seem to only be based on higher interest rates, but also on the weakness of the Chinese economy (here). But, as Wolf of Wolfstreet famously stated: “Nothing goes to heck in a straight line” (here). Hence, we will have to get ourselves accustomed to the roller-coaster that the German economy has become in the current poly-crisis.