The German economy in March 2021 – walking on egg shells?

After the February figures presented a mixed picture while discussions on a “serious” lockdown alienated the economy (here) the question was how the German economy would fare in March 2021. Not too bad, but, hey, let’s take a more detailed view into the German economy:

Although (as reported) the “five wise (wo)men” (Wirtschaftsweise) had lowered their expectations for the growth of the German GDP to 3.1% (here) in the previous month, the German government is more optimistic and sees a growth of 3.5% for 2021 (here, in German).

The German DAX seems to share this optimism, since the index gained nearly a thousand points in the course of March 2021: Starting at 14,012 on 1 March it continuously rose and ended at 15,008 points on 31 March 2021.

German industrial orders – after the December ’20 setback with -1.9% (MoM ), an increase of just 0.8% (MoM, no YoY-data!?!) in February, orders moved another notch with +1.3% (MoM) in March 2021. Germany’s industrial production, however, is taking another (pandemic-related?) hit. After decreasing substantially with -2.5% (MoM, -3.9% YoY) in January, it again decreased by -1.6% (MoM, -6.4% YoY) in February 2021. German exports, continued its moderate growth with +0.9% (MoM; -1.2% YoY) in February, after +1.4% (MoM, but still down -8.0% (!!!!) YoY) in January 2021. 

The German Target 2 balance gained some Euro 40bn, after 1.043bn at the end of February, it is now at 1.081bn at the end of March 2021. The continous rise of the German inflation-rate continues – from a negative -0.3%, in December 2020 and a respectable 1.0% in January over a more than modest 1.3% in February now to 1.7% in March 2021 (each MoM). 

The German labor market, after adding some 4,000 unemployed, hence 2.905m or 6.3% of the workforce unemployed in February, shed some 77,000 from its “payroll”, the total figures decreasing to 2.827m or 6.2% in March 2021. After the insolvency figures for March came in virtually the last minute (after I wrote my monthly), the April figures followed suit. Overall, corporate insolvencies in Germany went south by -15.5% for the whole of 2021. This trend (again) accelerated in January 2021 with a further decrease of -31.1% (YoY). However, looking at the graph at the end of the press-statement, I wonder how the curve can – given the figures – RISE. But this is another story..

The leading German sentiment indicators, are still rather inconsequential on the consequences of the lockdown 3.0: While this month the German (Industrial) Purchasing Managers’ Index (PMI), gained another considerable 6.1 points and ended at 66.6 points on 1 April 2021, the ZEW Indicator (for the current situation) remained unchanged from -67.1 points in February to -67.2% in March 2021. The Ifo business climate index continued its rise from 91.1 points (or 90.3 points (seasonally adjusted)) in January to 92.4 points in February to 96.6 points in March 2021.

To sum up: Given the – again – mixed picture of the German economy the government’s forecast regarding the growth of the German economy seems to be rather calculated optimism owed to the starting election campaigns (the Bundestag will be re-elected on 26 September 2021) than founded on hard figures. However, exports indeed send a sign of hope for they are increasing – which probably leads to the currently positive/stable sentiment indices. We will see whether the hope is warranted. Until then, my feeling is that we are walking on egg shells.

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