The German economy in March 2018 – Weakness ahead?

Also in comparison with February, March 2018 does not seem to be the month of recovery but rather a mixed bag if not the first signal of another bumby road ahead:

After the crash in February, the DAX lost some more points during the month. However, the increased volatility gives even more reason to worry: After closing at 12,435 points on 28 February 2018, the index lost another few hundred points at the start of the month and closed at 12,190 already on 1 March 2018, then continuing its slide down to 11.787 points on 26 March, before closing at 12,096 on 29 March 2018. So, again, the DAX lost in comparison to the previous month – it remains to be seen whether this is a glitch or a new trend…

Although curent data on the development of Germany’s GDP in the first quarter of 2018 is not available yet, adjacent data indicates that at least the pace of Germany’s growth has lost some of its momentum: E.g., German exports, after setting another record in 2017 and against pundit’s expectations declined by 3.2% in February (MoM), after already declining by 0.4% (MoM) in January 2018. Still, the German Target 2 balance reached another record high with Euro 923 Billion.

Also, the German unemployment-rate fell further from 5.7% in February to 5.5% in March 2018, the number of unemployed falling by around 88,000 (MoM) now reaching 2.458m. Insolvencies of German companies (after surprisingly increasing in the last months of 2017) continued their decline and met another record-low with -3.4% in January 2018.

There against, the German inflation-rate further increased from 1.3% in January to 1.4% in February and now to 1.6% in March 2018 (each MoM). Hence, there might a reverse of the previous trend – to be monitored in the months to come. Also, Germany’s industrial production took a surprising hit and – with a minus of 1.6% (MoM) – sunk to levels not seens since 2015. There against stand new orders: While decreasing by -3.9% in January, they increased by more than 13% in February 2018 (each MoM) – pointing to another statistical anomaly.

Already reflecting the mixed signals, the leading German indicators unisonally point south: The German (Industrial) Purchasing Managers’ Index (PMI) – (again) further declined from 60.3 points in February to (currently) 58.2 points in March 2018. The Ifo business climate index fell from 115.4 points in February to 114,7 points March 2018, thereby signaling some weakness ahead. Also, the ZEW Indicator further declined from 92.3 points in February to 90.7 points in March 2018.

Hence, February (cf. here) does not seem to be a “one-time-dent” as I phrased it then. Let’s hope, that it was not the start of a turn to the negative as some pundits imply (cf. here).

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