Monitoring indicators: the German economy lives in the future
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The index of investor confidence in the German economy, published by the Center for European Economic Research (ZEW), updated its six-month maximum in October, amounting to minus 1.1 points after minus 11.4 points in September (index values above zero indicate investor optimism, below – pessimism ). Analysts predicted that the index would be minus 9.3 points. The more significant than expected growth in the indicator is explained by the fact that the majority of respondents believed that in the near future the ECB rate will remain at the current level (see Kommersant on September 15), and inflation will continue to slow down.
Another index, the current economic situation in Germany (also calculated by ZEW), continued to decline in October: minus 79.9 points (the minimum since August 2020) after minus 79.4 points in September. This indicator, let us explain, depends less on expectations and more on indicators published by the country’s federal statistical office (Destatis). And these indicators do not inspire optimism among investors. Thus, the retail sales indicator went even deeper into the negative in August, decreasing by 1.2% month-on-month (a record drop since December 2022) and by 2.2% year-on-year.
The volume of industrial production in Germany also continued to decline in August: month-on-month it decreased by 0.2%, year-on-year by 1.97% (see chart). The most noticeable monthly decline was recorded in electricity generation and construction. Let us explain that Destatis, unlike, for example, Eurostat, takes into account in the overall indicator of industrial production not only traditional processing, mining and energy, but also the construction industry. Industrial production excluding power generation and construction rose 0.5% in monthly terms in August after declining 1.8% the month before. However, it is too early to talk about an impending recovery in industrial production, ZEW believes.
The German authorities recognize the problem of weak industrial indicators: they influenced the fact that in the fall the German government revised the forecast for the country’s GDP dynamics. In the spring, it was expected that the euro zone’s largest economy would grow by 0.4% this year and 1.6% next year. Now it is assumed that in 2023 GDP will decrease by 0.4%, and in 2024 it will grow by 1.3%.
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