The German economy in July 2018 – statistics and sentiment indicators (never) lie!

The mixed picture described for the German economy in June continues in July – also due to some apparent issues with statistical accuracy:

After a long journey down, the German DAX could make his first monthy gain in July: After closing at 12,306 points on 29 June 2018 the index nearly gained 500 points and closed at 12,805 points on 31 July 2018.

German exports, after gaining another 1.8% (MoM), but loosing -1.3% (YoY) in May, remained stable (0.0%) on a monthly basis, but gained another 7.8% (YoY) in June 2018. During the summer holiday-season, it is rather hard to discern any meaningful reasoining from this data, though.

After reaching a new record of Euro 976 Billion in June, the German Target 2 balance lost the incredible amount of Euro 63 Billion (!) and declined to “only” Euro 913 Billion in July 2018 amid a fierce discussion of the consequences of such a balance (here, in German).

Germany’s industrial production’s roler-coaster ride of the last months continues: After gaining 2.6% in May (MoM), it lost -0.9% (MoM) in June 2018. While (after a four-months decline), industrial orders increased by 2.6% in May 2018, they again fell by -4% (MoM; -0,8% YoY).

Due to the holiday-season, German unemployment-rate moderately increased from 5.0% in June to 5.1% in July 2018, the number of unemployed rising by around 49,000 (MoM), but falling by another 193.000 (YoY) now reaching 2.325m.

While the number of corporate insolvencies shall have increased by 9.9% in April (cf. here my fundamental criticism on Destatis and Creditreform’s statistics (in German), the same number shall have declined by 8.4% in May 2018 (each YoY). In short: It is rather likely that these immense jumps are due to statistical glitches. Therefore, now real tendency regarding German insolvencies can be taken from it; it is quite useless (cui bono?).

The German inflation-rate, remained steady at 2.0% also in July 2018 (MoM).

The leading German sentiment indicators are not in sync for July 2018: The German (Industrial) Purchasing Managers’ Index (PMI) – for the first time this year – increases from 55.9 points in June 2018 to 57.3 points in July 2018. There against, the Ifo business climate index slightly further declined from 101.8 points in June to 101.7 points in July 2018. The ZEW Indicator fell even more sharply by over seven points (!) from 80.6 points in June to 72.4 points in July 2018.

Probably also due to inaccurate statistics, it is currently not possible to seriously discern any tendency in the German economy – a tendency which is perfectly mirrored in the diverging sentiment indicators. However, the German MSM seems now to be “set” for a recession as a Handelsblatt article from May (here) and a Spiegel-Online (here) article from today proves. Given the current crash in Turkey and its potential for a spill-over to Italy and Spain, an unclarified Brexit and the potential for a further round in the trade-war between China and the USA the prospects for the German economy indeed do not look too bright at the end of this summer. Which was foreseeable….

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