Category Archives: German economy

24/6/20: German Business Sentiment for June: Mixed Signs of the Ongoing Recovery


Germany's ifo Institute published June survey results for business confidence, reflecting the latest changes arising from the graduate, but fast, 'normalization' of economic activities. There are some improvements in forward expectations, set against virtually no improvement in current conditions:



The gap between pre-COVID19 and current conditions sentiment remains massive, with trough to current reading improvement of just 2.4 points, compared to the pre-crisis to trough fall of 20.2 points. Expectations (6 months forward) gains 11.9 points on the trough, with pre-crisis to trough decline of 21.5 points. This implies that forward expectations are now just over half-way into recovering pre-COVID19 levels, but current conditions assessment still shows dire state of the economy.

So far, current conditions dynamics do not suggest a V-shaped recovery, but there is some hope in terms of expectations. Manufacturing and construction sectors dominate negative outlook. Services sectors current assessment is matched by forward expectations, while trade sectors are showing more robust recovery across the board.

27/5/20: Germany: Employment and Business Activity Show Gentle Uptick in May


Germany employment conditions improved slightly in May, based on ifo Institute survey:



The gains are in line with the Business Activity survey results:


However, both business expectations (major driver of improvement) and current conditions (remaining deeply under water and actually still deteriorating in May) are well below 2009 crisis reading:

8/4/20: Ifo Institute Germany Forecast for 2020


A surprisingly 'positive' forecast for Germany from ifo Institute this morning:



While GDP contraction for 2020 looks sharp at -4.2 percent y/y, unemployment figures appear rather robust and employment levels seem to be only weakly impacted. Forecast for current account implies subdued global demand shocks. The swing in the fiscal position is roughly 6.5 percent of GDP, reflecting emergency supports measures. This is significant, and underpins shallower expected effects on employment and unemployment, as well as no deflationary dynamics in labour costs.

My view: Germany entered the pandemic crisis with already weak economy. 2019 growth at 0.6 percent was shockingly weak, with the economy skirting recession. Massive strength in the current account was reflective of weak domestic demand and the economy dependent on growth momentum globally. This momentum is now severely disrupted, and I do not expect robust global recovery outside domestic demand. In other words, my view is that worldwide exports are unlikely to rebound robustly in H2 2020, putting severe pressure on net exporting economies, like Germany and Italy.

So, whilst 4+ percent drop in full year GDP might be fine, I would expect closer to 5-5.5 percent decline (reflective of weaker prices), and much more pronounced impact on unemployment and employment levels.

22/10/17: Oh my… Germany Looks Like Japan ca 2000-2001?


A pic worth a 1,000 words:


Via Holger Zschaepitz @Schuldensuehner

In simple terms, despite its current fortunes, on the longer time horizon, German economy is suffering the same fate as the Japanese one, with two caveats:

  1. A lag of a couple decades; and
  2. An adjustment for institutional structures (e.g. greater openness to migration).
These are reflected in the distance between the German yields today and the Japanese yields in the 1990s and 2000s. That distance, of some 1,000 basis points, is material to the debt carry capacity (meaning Germany has much greater borrowing capacity than Japan had back in the early 2000s). But it is also more uncertain, as ECB monetary policy cannot fully converge to the German conditions alone (it can be dominated by these conditions for quite a long while, but neither perpetually, nor fully).

So here we have it, folks, our value systems (reflected in demographics) have Japanified Germany... before our fiscal policies did... 

22/10/17: Oh my… Germany Looks Like Japan ca 2000-2001?


A pic worth a 1,000 words:


Via Holger Zschaepitz @Schuldensuehner

In simple terms, despite its current fortunes, on the longer time horizon, German economy is suffering the same fate as the Japanese one, with two caveats:

  1. A lag of a couple decades; and
  2. An adjustment for institutional structures (e.g. greater openness to migration).
These are reflected in the distance between the German yields today and the Japanese yields in the 1990s and 2000s. That distance, of some 1,000 basis points, is material to the debt carry capacity (meaning Germany has much greater borrowing capacity than Japan had back in the early 2000s). But it is also more uncertain, as ECB monetary policy cannot fully converge to the German conditions alone (it can be dominated by these conditions for quite a long while, but neither perpetually, nor fully).

So here we have it, folks, our value systems (reflected in demographics) have Japanified Germany... before our fiscal policies did...