The German Economy in September 2017 – economic paradise, political hell?

The German people have elected their new Parliament on 24 September, at least the predictions of one week before were not totally off, with the right-wing “Alternative für Deutschland” gaining 94 seats, the liberal democrats (“FDP”) being back in the seats and everybody else not really achieving the results so badly wished for. The reactions range from “Germany is becoming a normal” to warnings before a new Nazi-Deutschland. Wow!

There against, after a (well deserved) summer-break, the German economy resumed its path of relentless growth:

After three months of decline, the German DAX seems to have started its usual September-hausse: After closing at 12,142 points on 1 September, the index gained nearly 700 points over the month and closed at 12,828 points on 29 October 2017. Hence, due to the central-banks politics or not, the previous down-turn in hindsight seems to be just a softening during holiday-season. Although Doom-Sayers are on their (also usual highs) in October (cf. here), I guess that the rally will go on – fueled by dovish stances by the CB’s all around the world.

After a decline of 2.8 in June (which I rated as a statistical particularity already then), German exports in July 2017 (latest available figures) increased by 8.0% on a YoY-basis. The German Target-2-balances in August 2017, though, again declined by another Euro 4bn from the previous Euro 856.5bn in July to Euro 852.5bn in August 2017 (cf. here).

After the end of the summer season, the German unemployment-rate slightly decreased again from 5.7% in August to 5.5% in September 2017, thereby marking the lowest number since June 1991.

The German inflation-rate remained unchanged at 1.8% in September 2017 (MoM) – again driven by higher food and energy prices. And economists recon that this will not change, they foresee an annual inflation rate of 1.7% for 2018 and of 1.8% for 2019. As stated elsewhere (and a year ago!), I think that the inflation will in the end force higher interest-rates on the markets, even if the central banks try to prevent this and this will then lead to THE crash.

Corporate insolvencies in Germany, after increasing in May 2017, again decreased by 3.28% in June 2017, thereby resuming the downward trajectory since 2010. For the first half of 2017, corporate insolvencies decreased by 5.9% (YoY). Faced with these low figures, German insolvency administrators are getting into serious trouble (cf. here).

After declining by 1.1% in June, Industrial production in Germany stagnated in July 2017. However, since new orders again increased by 3.6% in August (MoM), it seems highly likely that industrial production will rise in the coming months. This prognosis is again supported by a strong German (Industrial) Purchasing Managers’ Index (PMI) which increased from 59.3 points in August to 60.6% in September 2017. To cite the press-release of IHS Markit: “At 60.6 in September, up from August’s 59.3, the final IHS Markit/BME Germany Manufacturing PMI recorded its highest reading since April 2011 and signalled a strong improvement in the overall health of the goods – producing economy.” Anything to add?

Well, indeed: to pour some water into wine (to again Germanize a bit), against expectations of the pundits, the Ifo business climate index decreased from 115.9 points in August to 115.2 points in September 2017. However, the ZEW Indicator gained another 1.2 points from 86.7 points in August to 87.9% points in September 2017. Hence, I would assume that the slight decrease in the Ifo-index represents another statistical glitch rather than a new trend. But, as always, we can verify it next month.

My statement in the previous monthly proved to be correct: the German economy, after record-breaking months from May to July, took a summer-break in August. Absent a new crisis (Korea, anybody?) my guess is that the figures in October will be better than the ones in September. However, I seriously doubt that we will see a new German government before the end of this year.

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