And indeed – at least in Germany – the train of economic growth kept rolling throughout May unabated (as hoped for at the end of March) – now reaching levels never seen before in ALL of the areas:
The German GDP grew by 0.6% in the first quarter of 2017 (MoM) from 0.4% in the last quarter of 2016 – and its seemingly not all about exports, but capital expenditure WITHIN Germany, at least according to Handelsblatt. However, in a later article, the Handelsblatt laments about the high share of exports within the growth rate.
After closing at 12,438 points on Friday, 28th April, the German DAX again gained another 177 points and closed at 12,615 points on Wednesday, 31 May 2017, setting a new all-time high on 15 May when “crossing” the 12,800 benchmark. Hence, the rally continued until mid-May but lost a little momentum from there.
Do I need to state that in May, German exports – again (for several months in a row now) – reached a new record high, with exports reaching more than Euro 118bn, thereby rising by 0.4% MoM and even by 10.8% on a YoY-basis (!)? Given President Trumps latest comments on the “bad, bad” Germans, it will be interesting to see how this figure will evolve over the next years, though.
Although the current Target-2-balances for Germany are not on the Deutsche Bundesbank Website at the time of the publication of this post (cf. here), it is a fair estimate that the amount further increased (in sync with the exports) from the previous Euro 843 bn. While Die Welt reports on the amounts Germany is liable for in accordance with the official ECB-measures (QE, etc.; against which a motion is now again pending with the German supreme court, cf. here), the respective article does not encompass the (inherent) risk of the Target-2-balance – which is five-fold the amount!
Also, German unemployment-rate, hit another low in May with 5.6%, the number of unemployed fell by another 77,000 to 24498m (MoM) and by 166,000 (YoY). Needless to say, that this is (AGAIN!) a new record and these low levels were not seen since the German re-unification…
Interestingly enough, the German inflation slowed down to 1,5% again, after 2% in April and 1.6% in March 2017. The decrease is mainly attributed to lower energy prices. However, given that the prices for real estate are skyrocketing in Germany (bubble anybody?) and that Germany – also for demographic reasons and (due to or despite (?)) the influx of refugees – faces full-employment in the near future, wages do not seem to influence inflation in the current scenario.
In accordance with the strong German economy, insolvency rates in Germany further decreased by an unbelievable 13.6% in February 2017 (YoY).
Also, the German (Industrial) Purchasing Managers’ Index (PMI) increased from 58.2 in April to 59.5 points in May 2017, thereby reaching a 73-month high (that is more than 6 years!). And – not too surprisingly – the Ifo business climate index reached another all time high rising from to 112.9 points in April to 114.6 points in May 2017. The ZEW Indicator for the current economic sentiment made another big jump, too, gaining another 3.8 points from 80.1 points in April to 83,9 points in May 2017.
Overall, the current picture is one of sheer strengh. In my personal career I have never seen such strong figures. So, first, let us keep our fingers crossed that this positive developments continues for as long as possible – and that enough people of the lower 99% participate in this boom. Secondly, let us hope that Germany does not rest a little too long and too comfy on its current laurels: According to a current ranking of the IMD World Competitiveness Center, Lausanne, Germany has – over the last years – lost a lot of its competitiveness (see here for a good comment in Die Welt). Such indications and their inherent warnings are not new (I commented on it a year ago, cf. here), nevertheless, politics and politicians do not seem to get the drift. The last major reforms which built the basis for the current economic success are more than 12 years old now (“Agenda 2010“) – exactly the time Mrs. Merkel is now in power. Accordingly, some commentators condemn Mrs. Merkel’s policy during her “reign” (which might reach Kohlian proportions now) as too short-sighted (cf. here). After reading the first comments on the currently enacted Federal/State-finance-compensation-scheme (which is regarded as a “big” reform), I fear that it will cause more issues than it resolves. So, in the end, a successor to Mrs. Merkel risks to end-up like Mr. Schroeder did after he took over from Mr. Kohl: facing the “sick man of Europe” again.
CU next month!