Corona or not – German industry is continuing its recovery. China is considered to be the driving force. But not every branch of the economy is benefiting from the upward trend.
Dhe corona numbers, which have been rising again since late summer, still leave German industry largely cold. While the service sector is suffering from the corona pandemic and contact and business restrictions, the upward trend in manufacturing continues. An indication of this is given by his incoming orders, an important early indicator for economic development.
As the Federal Statistical Office announced on Friday, the industry recorded growth in new orders in October – and thus for the sixth month in a row. With a plus of 2.9 percent compared to September, the previous year’s figure was skipped as well as the pre-crisis level: the statisticians’ order index in the last “pre-corona month” in February was at 102.6 points, at 64.7 points after the rapid crash in April. Now 103.4 points have been reached. In contrast to the demand for capital and intermediate goods, however, consumer goods orders fell in October.
The driving force is China’s economy, which has recovered noticeably in recent months and is the most important market for German industry in terms of trade volume. This contributed to the fact that, unlike domestic orders, after the first recovery in early summer, orders from abroad did not show any dampening – and have also increased more recently. If you compare the months of September and October with July and August, the growth in orders from the non-euro area was 6.9 percent. This contrasts with 5.4 percent from Germany and 1.3 percent from the euro area.
The overall picture of the economic situation in Germany thus remains divided into two parts. On the one hand, there are service providers, whose share in economic output is around 70 percent. On the other hand, there is a robust industry, including handicrafts and construction, which, as a manufacturing industry, provide the remaining 30 percent of added value.
And a look at so-called real-time indicators, which are becoming more and more widespread among economists due to their faster availability, shows that consumer-related service providers in particular suffer from Corona.
The frequency of pedestrians in German city centers, for example, has noticeably decreased after a strong summer recovery. The consumer climate has also deteriorated noticeably. Conversely, the so-called mileage index, which measures the kilometers driven by trucks on German toll roads and is more of an industry-related indicator, tends to continue to rise and thus resembles the rally on the stock market.
However, there are slight contradictions in the economic diagnosis. Electricity consumption, for example, is also considered an industry-related indicator, as the greatest demand comes from the manufacturing sector. But after consumption had returned to normal in late summer, it is currently 3.4 percent below the average of previous years.
The same applies to export expectations. They are based on the monthly survey of 2,300 industrial companies – and fell both in October and November, regardless of the growing number of incoming orders and hopes for corona vaccines.
If the business situation and business expectations are visualized together, as the Munich-based Ifo Institute does in its monthly “business cycle clock”, the pointer only remained in the boom for a short time in the summer. It is currently facing a downturn – unlike after the financial crisis in 2009, when the pointer changed almost like a picture book from recession to upswing and boom.
This coincides with the weekly activity index of the Bundesbank, which summarizes all indicators. It too remains positive, but, as is usual in the downturn, the trend is decreasing.