The German economy in September 2018 – the start of (economic) autumn?

Well, the German economy is currently doing well, when you look at the figures for exports, unemployment or industrial orders. However, from the perspective of inflation or industrial production it does not look to great. The outlook for the foreseeable future, however, seems to be rather measly, if you agree with our government. Hence, after a not-so-clear August (here), the September might prove to be the start of an economic autumn, as the following figures show:

In the wake of several downgrades from the “Wirtschaftsweise” (here) as well as the OECD & IMF (here), the German government lowered its expectations for GDP growth for 2018 from 2.3% to 1.8% and for 2019 from 2.1% to 2.0% (here).

The German DAX could not keep his gains from the previous months, but rather resumed its losing streak: After closing at 12,364 points on 31 August 2018, the German stock index closed exactly 100 points lower – at 12.246 points on 28 September 2018 and is now down nearly 10% for the whole year (here).

German exports, after gaining more than seven (7!) per cent for two consecutive months (July 2018: 7.6%), the gain in August 2018 with +2.2% (all YoY) remained fairly strong (however, on a MoM-basis, exports declined by -0.1% after losing -0.9% in July!).

There against, Germany’s industrial production’s now really seems to decline, albeit in slow motion: After losing -0.9% (MoM) in June, it declined by another -1.1% (MoM, but gained another 1.1% YoY!) in July and lost another -0.3% in August 2018. However, there is some silver lining, since German industrial orders discontinued their decline of the previous months and rose from -0.9% in July (YoY and MoM) by 2.0% (MoM) in August 2018.

(Due to the “Italian Crisis”?) the German Target 2 balance is back, where it was before the summer: after declining to Euro 912,5 Billion in August, the balance increased to Euro 956 Billion in September 2018.

After the end of the holiday season, German unemployment-rate is on the decline again and moderately fell by 0.2% from 5.2%in August to 5.0% in September 2018 (MoM).

For the first time this year, Corporate Insolvencies in Germany rose: After a decrease of -2.5% in June, the number rose by 1.8%in July 2018.

It is back: The German inflation-rate, rose from 2.0% (MoM) in August to 2.3% in September 2018.

The leading German sentiment indicators are not in sync for July 2018: The German (Industrial) Purchasing Managers’ Index (PMI) decreased from 55.9 in the beginning of September to 53.7 % in the beginning of October 2018. Also, the Ifo business climate index slightly decreased from 103.8 points in August to 103.7 points in September 2018. There against, the ZEW Indicator slightly increased from 72.2 points in August to 72.6 points in September 2018.

The current situation reminds me of the two ways Ernest Hemingway was talking about when he was asked: “How did you go bankrupt?” “Two ways. Gradually, then suddenly.” We might be in the “gradual” phase now….

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