Yep, as predicted in my last monthly report, “(economic) autumn” (cf. here) has finally arrived in Germany. Amid political tensions after Chancellor Merkel announced here demise as leader of Germany’s conservative party, there is mounting evidence that the German economy has peaked somewhere in the previous months. But let’s have a closer look at the details:
Germany’s GDP shrunk by -0.2% in the third quarter of 2018, hence a decline for the first time since 2015. Most of the commentators see the automotive sector as the main driver which has problems to adapt to a new style of emission test (Diesel, anybody?). This is either bull*** or we Germans indeed have a serious problem: if mere problems of emission testing could cause a decline ON ITS OWN, what does that mean for the economy when Tesla and friends REALLY start to build electric cars?
In sync with the GDP, the German DAX maintained its downward path and lost another 799 points (!) over the month: After closing at 12.246 points on 28 September, the index closed at 11,447 on 31 October 2018 and is now down roughly 12% for the whole year (here).
Also in sync with the GDP, German exports, after gaining more than nine (9!) per cent in months ((July 2018: +7.6%; August 2018: +2.2% (all YoY), however, on a MoM-basis, exports declined by -0.1% after losing -0.9% in July!), declined by 1,2% (YoY) and 0.8% (MoM), thereby probably setting the scene for the GDP decline…
There against, Germany’s industrial production, which had a streak of declining months (-0.9% (MoM) in June, -1.1% (MoM, but +1.1% YoY) in July and -0.3% in August), regained its composure with a small growth of +0.2% (MoM, but +0.8% YoY)). Also, German industrial orders, after rising by 2.0% (MoM) in August, rose another +0.3% (MoM; but declining by 2.2% YoY!!!) in September 2018.
After already falling from 5.2% in August to 5.0% in September (MoM), the German unemployment-rate fell to 4.9% in September 2018 – for the first time since 1981! Also, the free jobs in Germany reached an all-time-high (cf. here).
The leading German sentiment indicators are not in sync for July 2018: The German (Industrial) Purchasing Managers’ Index (PMI) decreased from 53.7 points in the beginning of October to 52.2 points in the beginning of November 2018. Also, the Ifo business climate index slightly decreased from 103.7 points in September to 102.8 points in September 2018. Also, and thus in sync with the other indicators, the ZEW Indicator decreased from 72.6 points in September to 70.1 points in October 2018 (cf. for a more detailed analysis of ZEW indicators here (in English)).
With the major – and especially the early warning – indicators flashing red, the German economy seems to have taken the southbound train, at least for the time being. Let us hope that the issues around Brexit and Italy (to name but only the European major items) will not lead to a further brake for the “locomotive” of Europe.