Wednesday, January 30, 2013

30/1/2013: German Economy: Returning to zero growth in January 2013

Germany's CESIfo published the latests (January 2013) assessment of the state of the German economy in Manufacturing and these are slightly more upbeat than at the end of Q4 2012, albeit with some clear seasonal supports.

"In manufacturing the business climate indicator continued to rise. Manufacturers are more satisfied with their current business situation than last month. The improvement in expectations with regard to future business developments continued into the New Year. Optimism is returning. After three successive declines, capacity utilisation rates also rose."

As per data below, in manufacturing 'optimism' is not exactly 'returning', but rather 'pessimism is receding', as business expectations remain below 0 on balances:

"In wholesaling, on the other hand, the business climate clouded over. Wholesalers are less satisfied with their current business situation and slightly more pessimistic about future business developments. In retailing the business climate indicator rose somewhat. This was due to a slightly more positive assessment of the business situation, while retailers’ business expectations remained unchanged.

In construction the business climate index rose sharply. This was primarily due to far more optimistic expectations, which last reached such a high level in March 2012. Assessments of the current business situation also improved."

It is worth noting that in Construction sector, it was business expectations that drove overall index up sharply and these are exceptionally seasonally-driven:

 However, as balances data below shows clearly, three of five sub-sectors continue showing weaknesses:

Overall, the three core aggregate series are above 100 for the first time since May 2012 (good news), but at levels that are signalling stagnant or very weak growth.

  • Climate indicator reading is at 104.2 - only sixth highest reading in last 12 months, and substantially below 108.2 reading in January 2012;
  • Situation indicator is at 108.0, which is only 10th highest reading in last 12 months, and well below 116.3 recorded a year ago.
  • Expectations are at 100.5, marking 5th highest reading in 12 months, down marginally on 100.7 in January 2012.

In terms of overall impact on the euro area, the above figures suggest that the January 2013 eurocoin indicator-based forecast (see details here) of -0.4% growth in January 2013 should be more moderate. Not enough data yet to recompute the actual forecast figure from -0.4%, but I believe it can be closer to -0.2-0.1%.

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