The German economy in November 2019 – ready to (re-)launch?

Throughout 2019 I never thought, that I’d post this title at the end of the year. However, given the developments of the last two months (September – plateau already? / October – against all odds) it seems appropriate. But, hey, let’s look into the German economy in some more detail:

After narrowly escaping a technical recession (meaning two consecutive quarters with “negative growth”) by growing it’s GDP by 0.1% in the 3rd quarter of 2019, the leading economists are getting more optimistic about Germany escaping a recession altogether.

The DAX rallyed early in the month and, after closing at 12,866 points on 31 October 2019 it went up to 13,287 on 27 November before ending at 13,236 on 29 November 2019, hence gaining an overall of 370 points in the course of the month (here). Despite the gloomy economic outlook, the DAX seems to prosper – or is it already in anticipation of a “relaunch”?

German exports, after already gaining 1.5% (MoM) and even 4.6% (YoY) in September, grew by another 1.2% (MoM) and even 1.9% (YoY) in October 2019. Hence, after two consecutive months of solid growth, a trend reversal of the earlier months of freefall in exports might indeed be near. In accordance with the positive momentum in exports, the German Target 2 added around Euro 33 (!) Billion and reached Euro 870 Billion in the end of November 2019. The German inflation-rate remains subdued at 1.1% in November 2019.

Germany’s industrial production, again, took a hit with a further decrease of -1.7% (MoM) and even -5.3% (YoY) in October 2019 (after -0.6% (MoM) and -4.3% (YoY) in September, after +0.3% (MoM; -4.0% (YoY)), in August and -0.6% (MoM) / -4.2% (YoY) in July 2019). Also, German industrial orders, after climbing by 1.5% (MoM) (but falling by -5.4% (!) (YoY) in October), took another turn for the (slightly) worse, with a decline of -0.4% (MoM) and even -5.5% (YoY) in October 2019.

German unemployment-rate decreased by another 24,000 (MoM), but only 6,000 on an annual basis to now 2.180m unemployed, the unemployment rate remaining at 4.8% in November 2019. Hence, the job market remains robust and might show some early signs of more dynamics. 

The trend reversal in German corporate insolvencies finally seems to materialize: after tepidly rising by 0.2% in July and another 0.6% in August, they rose by even 1.1% (all YoY) in September 2019. Given that there are now five out of the last nine months show a rise in corporate insolvencies, the tide seems to have turned now – altough for the first three quarters the overall number still declined.

The leading German sentiment indicators, are positively in sync, pointing to an end of the recessionary trends: the German (Industrial) Purchasing Managers’ Index (PMI) continued its upward trend and increased from 42.1 points on 4 November to 44.1 on 2nd December 2019. The ZEW Indicator (for the current situation), also gained slightly from 25.3 points in October to 24.7 points in November 2019 (while the outook is dramaticlly improving!). Also, the Ifo business climate index slightly improved from 94.6 points in October to 95.0 points in November 2019.

To sum up: While some early indicators, such as the sentiment indicators and exports point to a positive reversal of the recessionary trends of the last months / year, production and new orders remain stuck in a downward trend. Recent statements of leading German pundits underline the notion that the German economy has left the worst part of the “recession” already behind it and is back on a growth trend, even if the growth seems – with up to 1.0% GDP-growth foreseen – rather subdued. Given the statements of Mr. Trump that a trade deal with China seems to be near and the (finally!) decision of the British population to leave the EU, by electing the Tories and Mr. Johnson, is now clear, this positive trend might gain furthter traction. Due to the ongoing restructuring of the whole of the German automotive industry, however, the German economy will most probably remain on a fragile ground.

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