After November showed that the German economy would get through the crisis in a “W”-shape at best (cf. here), it will be interesting to look into the December figures in order to assess the path ahead. But, let’s look into the German economy in some more detail:
The first incoming figures from Destatis indicate that the German GDP, has “only” shrunk by 5.0% in 2021 which would be less than during the GFC where it shrank by 5.7%.
Despite the not so rosy outlook and the lockdown, the DAX, probably driven by the anticipated start of the vaccination, rose considerably: Starting at 13,382 points on 1st December, the index gained a considerable 336 points and ended at ended at 13,718 points on 30 December 2020, seemingly anticipating the not too bad economic figures.
The rebound of German industrial orders is – after having risen by another 1.5% (MoM) – gaining momentum with another increase of 2.3% (MoM, and also 6.3% YoY!) in November 2020. Also, Germany’s industrial production, altough still being 4.0% behind the pre-crises level alltogether, gained another 0.9% (MoM, but -2.6% YoY) in November 2020. Now in sync with the other indicators, German exports, are going strong, too, with an increase of 2.2% (MoM, but still down -1.3% YoY) in November 2020. But the growth is not only related to exports, also the German retail sector has grown by 4.1% in real terms in 2020 – although this growth is mainly linked to online-commerce.
The German Target 2 balance increased by another Euro 76bn compared to the Euro 1.060 Trillion in November and thus rose to Euro 1,136 bn in December 2020. Despite the ECB’s efforts to increase inflation, the German inflation-rate, was again negative in November 2020, with -0.3%, again (MoM). For the whole year, the estimate is that inflation rose by 0.5%.
Rather unusual for this time of the year, the German labor market, surprised with another set of rather positive figures: unemployment rose by only 8,000 (MoM, but 480,000 YoY), to 2.707m unemployed at a rate of (unchanged) 5.9%. German corporate insolvencies continued their decline with another mindblowing -31.9% (YoY). For a crisis of this magnitude, these figures rather scare the hell out of me than making me feel reassured.
The leading German sentiment indicators, are now rather inconsequential on the consequences of the next lockdown: while the German (Industrial) Purchasing Managers’ Index (PMI), gained a moderate 0.5 points and ended at 58.3 points on 1 January 2020, the ZEW Indicator (for the current situation) lost another 2.2 points and ended at 66.6 points in December 2020. The Ifo business climate index, there against, rose to 92.1 points in December from 90.7 points in November 2020.
To sum up: If someone had told me these figures in, say, May of 2020, I would have laughed. But here they are. Not looking too bad, don’t they? In fact, not only exports as the ususal suspect for any rise in the German economy is playing its magic – but also retail, which is – at the same time – in the most dire straits ever since the War. It will be interesting how the scenario will proceed in the ongoing lockdown…