The German economy in January 2024 – slowly, but steady…

As bad as 2023 ended (here), 2024 begins and the stream of bad news seems to continue unabated, as the following “monthly” shows:

Destatis just confirmed that the German BIP decreased by -0.3% in 2023. Even the German government has now accordigly lowered it’s forecast for 2024 from 1.3% to 0.2% (here) and other institutions are following suit (see the table here).

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 6,635 points on 2. January, and ended slightly higher a 6,689 points on 31st January 2024.

German industrial orders further and strongly recovered in December: after gaining 0.2% in September (MoM, -4.3% YoY), declining by -3.7% in October (MoM, -7.3% (!) YoY), again slighty increasing by +0.3% in November 2023 (MoM, -4.4% YoY), orders increased by 8.9% (MoM, and even +2.7% YoY!). There against, Germany’s industrial production further contracted: after -1.4% in September (MoM, -3.7% YoY), -0.4% in October (MoM, -3.5% YoY), and -0.7% (MoM, -4.8% YoY) in November, production further declined by -1.6% (MoM, even -3.0% YoY) in December 2023. On the other hand, the rebound of German exports proved to be short-lived:  after –2.4% in September (MoM, -7.5% YoY), -0.2% in October (MoM, -8.1% YoY) and +3.5% (MoM, but still -5.0 YoY) in November, exports declined by a rather shoking -4.6% (MoM, equally -4.6% YoY) in December 2023. 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 decreased by roughly Euro 52bn in January 2024 and ended at Euro 1,041bn. 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 and now decreasing to 2,9% in January 2024 (each YoY).

The German labor market further deteriorated: the unemployment rate – after 5.7% in September, also 5.7% in October, 5.6% in November and, again, 5.7% in December 2023, unemployment jumped by 0.4% to 6.1% in January 2024. German insolvency filings increased for the ninth 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,  they increaesed by another 26.2% in January 2024 (all YoY; cf. my most recent comment, here, in German)!

The leading German sentiment indicators, seem to indicate a certain plateauing in January 2023: The German (Industrial) Purchasing Managers’ Index (PMI) gained another astonishing 2.2 points and stood at 45.5 points on 1st February 2024. The ZEW Indicator (for the current situation) lost 0.2 points and was at -77.3 points in January 2024. The ifo Business Climate Index, too, lost 1.2 points and ended at 85.2 points in January 2024.

To sum up: With the exception of exceptionally great figures in incoming orders and an unexplicably good performance of the stock exchange, the German economy seems to deteriorate further from month to month. Not only the decline in productivity for seventh consecutive month in a row (here) but also the strong increase in insolvency filings (for the ninth month in a row) is a source of concern. And, although the Federal Labor Agency states in its notes accompanying the current figures that “the annual rise in unemployment at the turn of the year is lower this year“, truth be told that one year ago, the unemployment rate also jumped by 0.3%, but the overall unemployment rate remained below 6%, namely 5.7% in January 2023. Extrapolating these developments for the rest of the year – treacherous as that may be – would indeed point to a slow but steady decline of the German economy, thus confirming the current predictions. So, let us hope that the rebound in orders makes for a ray of hope.

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