The German economy in September 2020 – climax?

Again, unfortunately, close to the eleventh hour of October I am able to review the fate of the German economy in September. And, again, the German German economy – after bottoming out in May (cf. here) – started its rebound in June (cf. here), the rebound gaining momentum in July (cf. here) and August (here) and continued its upward trend in September 2020. But, hey, let’s look into the German economy in some more detail:

Still there are no new figures regarding the overall German GDP, however, the German minister for economic affairs, Mr. Altmaier, who already believed in early September that the GDP’s actual annual decrease will not exceed 5.8% (cf. here in German) now goes all in and states that the German economy will not lose more than 5.5% (here in German) in 2020. Given not only the 10.1% (QoQ; even 11.7% YoY) decrease in Q2/2020 and the decrease by 2.2% (QoQ) in Q1/2020, the coming shutdown in Germany and the pessimistic view of the IFO business climate index (cf. below) – this statement seems to be more propaganda than even an opinion.

As to prove this pessims, the DAX at least interrupted its seemingly instoppable rise in September: starting at 12,974 points on 1 September, reaching up to 13,255 points in mdi-September, the index ended at 12,825 points on 31 August 2020, thus losing 149 points.

The rebound of German industrial orders is – after cooling down in July – again gaining strength: after having only moderately increased by another 2.8% (MoM) in July 2020 (but decreased by another -7.3% on a YoY-basis). it increased by 4.5% (MoM, but still down -2.2% YoY) in August 2020. There against, Germany’s industrial production, which already in July only gained 1.2% (MoM, but -10.0% YoY) even lost a though miniscule -0.2% (MoM, but a rather major -9.6% YoY) in August 2020. German exports, on the other hand, although further slowing the pace of their rebound from 4.7% (MoM, still – 11.0% YoY) in July, gained another 2.4% (MoM, but stil down by -10.2% YoY) in August 2020.

After having passed the the psychologically important landmark of Euro 1 Trillion in June, the German Target 2 balance, it passed the 1.1 Trillion-landmark within two months totalling Euro 1.115 Trillion in September 2020 – thus adding Euro 59 bn in the course of a month. Also due to the legal implementation of a VAT-decrease by 3% (from 19% to 16%), the German inflation-rate, after crossing the psychologically important zero mark and going negative by -0.1% in July, and “rebounding” to 0.0% (MoM) in August, went negative again in September 2020 with -0.2%.

Also, the German labor market – due to the ususal seasonal activites – turned positive in September 2020 by losing 108,000 unemployed (MoM, but increasing again by an unbelievable +613,000 YoY) or -0.2% to 2.847m unemployed to an overall rate of 6.2%. As in the previous months, German corporate insolvencies continued their freefall with another -34.% (!)(YoY) in September 2020. Although these figures should be taken with a pinch of salt given corrections of previous releases by nearly 50% (cf. here, in German), even the remaining decrease is considerable.

The leading German sentiment indicators, mirrored the manufacturing sector’s moderate growth: the German (Industrial) Purchasing Managers’ Index (PMI), gained another 4.2 points and ended at 56.4 points on 1 October 2020. Also, the ZEW Indicator (for the current situation) gained more than 15 points to -66.2 points in September 2020. Finally, the Ifo business climate index gained some points and rose from 92.6 points in August to 93.4 points in September 2020. 

To sum up: The German economy seems to have reached a climax in September – although not all indicators are green. Especially the decrease in industrial production should give some reason to worry. But still, for the time being, Germany’s economy is not doing so bad given the circumstances.

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