The German economy in March 2019 – touching (at) base?

While in February, the German economy presented disappointing early indicators (here), March 2019 seemed to confirm the downturn. However, as we will see, between end of March and now mid-April the business climate changed somewhat:

While in the previous month, it rose despite disappointing data, the German DAX only gained another 10 points in the course of March: After closing at 11,515 points on 28 February, the index ended with 11,525 points on 29 March 2019 (here), however, it reached 11,788 points on March, 19th, before falling to 11,346 roughly a week later (before re-climbing to the said 11,525 points) – hence the VIX started to gain pace.

In February 2019, German exports gained another 3.9% ((YoY); compared to January: 1.7%; December: -4.5%, November: 0.0%, October: +8.5%, September -1.2%, August: +2.2%, July: +7.6% (all YoY)). However, on a monthly basis, exports lost -1.3%. The (corresponding) German Target 2 balance, after losing an incredible Euro 96bn (!) in the previous month, gained another 69 Billion (!) and rose from Euro 872 Billion in February to Euro 941 Billion in March 2019. The German inflation-rate, after rising to 1.6% (YoY) in February, came out slightly lower at 1.3% (YoY) in March 2019.

After a losing ground in the previous months (December 2018: -0.4% (MoM) / -3.9% (YoY), January: -0.8 (MoM) / -3.3 (YoY)), Germany’s industrial production registered another decline in February 2019, however only on a yearly basis, while gaining on a monthly basis with +0.7 (MoM) / -0.4 (YoY). German industrial orders, after already nose-diving in the previous month, rather tanked in February 2019: -4.2% (MoM) and -8.4% (!) YoY (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).

Against the overall declining trend, the German unemployment-rate fell by another -72,000 (MoM) and -157,000 (YoY) to 2.301m, or 5.1% in February 2019. German corporate insolvencies, though, followed the downward trend and rose by 5.7% in January 2019. However, given the rather high monthly volatility of this index, I would not see a trend here unless the following months show a similar increase.

The leading German sentiment indicators were not in sync in March: the German (Industrial) Purchasing Managers’ Index (PMI) continued its downward path from 46.7 points in early March to 44.1 points on 22. March 2019. In sync with this development, the ZEW Indicator continued its decrease with the loss of another 3.9 points from 15.0 points in February to 11.1 points in March 2019. There against, the Ifo business climate index broke its declining path of the previous six months and increased by a little more than one point from 98.5 points in February to 99.6 points in March 2019.

To sum up: While the Federal Government cut its already lowered expectations of last month (here) in half to an expected growth of only 0.5% for 2019 (here), the tide might currently turn – given the flow of extraordinary monetary measures taken by the People’s Bank of China (PBOC) which seemed to have pumped another roughly half a trillion USD in the market in March 2019 alone (cf here). Already the DAX is floating on this liquidity – easily surpasssing the 12,000 points-benchmark in early April. And the Handelsblatt already dreams of a rosy rest of 2019 (“Die Marktlage in den USA spricht für ein baldiges globales Wachstum“, cf. here). Given the postponement of Brexit, the recent GDP-growth in China (here) and the probably ongoing lose monetary policy of all central banks, this hope might indeed not be futile – even if Businessweek is already singing the “Swan Song” on Germany (here). The price of this exclusively debt-driven growth, though, will be hyperinflated high – that’s for sure!

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