The German economy in February 2020 – when TSHTF!

So, although with a view to the ongoing meltdown in the global economy it might seem a little odd to look at last months figures, this makes sense – if only to ascertain the status before TSHTF. Since, even before the virus really hit, the German economy remained in a rather fragile state, as the January monthly showed (here). But, hey, let’s look into the German economy in some more detail:

Already last month I mentioned that German GDP probably grew by 0.6% in 2019, while stagnating in the fourth quarter of 2019. The German minister for economics, Peter Altmaier, seemingly lacking any forecasting abilities, still predicted a growth for the German economy of 1.1% in 2020 on 29th January 2020. Well, I guess, we can forget about that.

After having lost around 400 points in January already, the DAX lost 1,155 points (!) in the course of February – starting at 13,045 points on 1st February and then falling to 11,890 points on 28 February 2020 (here) – starting the meltdown in accordance with the growing worries over the virus.

German exports, declined by 2.1% (YoY) in January 2020, while the German Target 2 balance only modestly grew by around Euro 10 Billion from Euro 811 Billion to Euro 821 Billion in the end of February 2020. The German inflation-rate, remained at 1.7% in February 2020 (YoY). Howecver, given the current crisis and the “end of the road” for central bank intervention, nobody really gives a heck about these figures anymore – at least not now and for the time being.

German industrial orders showed a small silver lining by climbing 5.5% (MoM), but declining by 1.4% (YoY) in January 2020. Especially, machine building companies looked into a filling order book (here, in German). Also, Germany’s industrial production rose by 3.0% (MoM), but declined by 1.3% (YoY) in January 2020.

Probably also due to the mild winter, German unemployment-rate decreased by 30,000 (MoM), but increased by 23,000 (YoY) in February 2020 to now 2.396m unemployed, the unemployment rate staying at 5.3%. German corporate insolvencies, fell only moderately with -0.2% in December, bringing the total for 2020 to the unbelievable low level of 18,749 or 2.9% less than in 2018.

Still, even with the incoming virus, the leading German sentiment indicators are not in sync: while the German (Industrial) Purchasing Managers’ Index (PMI) rose from 45.3 points on 3rd February to 48 points on 2 March 2020, the ZEW Indicator (for the current situation) lost 6.2 points and declined from -9.5 points in January to -15.7 points in February 2020. There against, the Ifo business climate index, mainly stagnated at 96.1 points in February 2020.

To sum up: To my mind, the end of February marks the perfect picture right before TSHTF – the outlook still improved from a low plateau reached in November / December 2019. Without the virus, the “unorthodox” measures of the Fed (repo-operations and the like) did their magic and we westerners were on the way for another boring year with record-breaking gains at the stock-exchange. Fragile, but moving ok. Although I was not quite hitting it when stating that already the February figures would be influenced by the virus, I am pretty sure that the March figures will – big time. And this will not be funny.