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MIL OSI Translation. Region: Germany / Deutschland –

Source: Federal Ministry for Economic Affairs and Energy The German economy continues to recover. The national and international infection rate is still burdening the economic recovery. After the first strong recovery in May and June, the recovery process is more subdued, although the catching-up process in industrial production was interrupted in August. Responsible for this is the weighty area of ​​motor vehicles and motor vehicle parts. However, given the noticeably higher order intake and a further improvement in corporate sentiment, the outlook remains positive, and private consumption is also recovering. Retail sales excluding motor vehicles have been higher since May than before the crisis. Vehicle sales have recovered noticeably and should continue to catch up. Sentiment indicators point to increasing consumer spending in the second half of the year. The effects of the corona pandemic on the labor market are still marked, but there is already a slight improvement. Unemployment fell again in September and short-time work is also becoming less important month by month. Employment rose for the second month in a row in August. The leading indicators show further improvements. General situation: Economic recovery is advancing The German economy is recovering step by step. However, after the first strong recovery in May and June in response to the end of the hard lockdown, the rest of the recovery process is making more difficult progress. The corona pandemic continues to result in changes in behavior among consumers and investors. Business sectors for which social contacts play a major role are particularly affected. Nonetheless, and despite the worrying occurrence of infections, the current economic indicators are signaling a continued recovery of the economy, supported by the extensive economic support measures taken by the federal government. Given the good start to the third quarter, by far the highest quarterly growth ever recorded will be reported. For the fourth quarter, the indicators are signaling that the recovery process will continue, albeit at a slower pace. In their current joint forecast, the economic research institutes are now assuming a decline in gross domestic product of 5.4 percent in the current year. In its interim projection from the beginning of September, the federal government had projected a decline of 5.8 percent. The global economy is still affected by the pandemic, but it is able to continue the recovery at a somewhat slower pace. Global industrial production increased in July for the third month in a row, but is still just under 4.5 percent below the level a year ago. World trade was also expanded and rose by 4.8 percent compared to June, but remained around 6.5 percent below the previous year’s level. The sentiment indicators continue to provide grounds for confidence. Overall, the purchasing managers’ index of J. P. Morgan / IHS Markit fell slightly to 52.1 points in September due to somewhat weaker assessments by service providers, but it was still well above its growth threshold. The World Trade Organization (WTO) is now assuming that world trade will collapse far less sharply in 2020 (-9.2 percent) than initially feared in the spring. The International Monetary Fund also announced a slight upward revision of its forecast for global GDP and world trade. German foreign trade needs patience In August, exports of goods and services rose again. Their value rose seasonally adjusted and nominally by 2.2 percent compared to the previous month, after it had already increased in May and June. In a two-month comparison between July / August and May / June, there was a significant increase of 11.6 percent. In contrast, imports of goods and services recovered by a strong 4.2 percent in August. In a two-month comparison, imports rose by 8.5 percent. Confidence among German companies is increasing with regard to the outlook. The Ifo export expectations for the manufacturing sector were on balance even more clearly positive in September than in August. Incoming orders from abroad increased again strongly in August by 6.5 percent and were thus even above the pre-crisis level of the fourth quarter of 2019. Overall, the outlook for German foreign trade is positive, but still exposed to risks. In the course of the recovery of economic activity in a large number of countries, German foreign trade is likely to increase further. However, the pandemic-related risks for the global economy remain high. The pandemic is by no means on the retreat globally. Even if there is no setback in world trade, the recovery process in German foreign trade will still take some time. Factory holidays in the automotive sector dampen industrial activity The catch-up process in the manufacturing sector was interrupted in August. Seasonally adjusted, the output was reduced by 0.2 percent compared to the previous month. In industry, the decline was 0.7 percent. The main reason for the lower output were factory holidays in the motor vehicle and motor vehicle parts sector, which contributed significantly to production losses of 12.5 percent in this important branch of the economy after the recent strong recovery here. Association data also speak for an extremely strong increase in vehicle production in September. Furthermore, the 1.8 percent drop in mechanical engineering in August slowed the general catching-up process against the background of still weak foreign demand. Production in industry as a whole reached around 88 percent of its pre-crisis level in February 2020 in August. In July / August taken together, industrial production was more than 10 percentage points above the average result of the second quarter. In the construction industry, there was a slight decrease in production of 0.3 percent in August. In the energy sector, on the other hand, output increased significantly by 6.7 percent. In a two-month comparison, output in the manufacturing sector increased by 5.8 percent in July / August compared to May / June. The industry increased its emissions by 8.1 percent in the same period. In the construction industry there was a decrease of 3.4 percent, while the energy sector recorded an increase of 5.0 percent. Incoming orders in the manufacturing industry increased even more significantly in August with an increase of 4.5 percent compared to the previous month compared to July 3 , 3 percent. The demand for intermediate, capital and consumer goods increased by roughly the same amount. The increase in incoming orders was driven by a significantly higher order volume from the euro area (+14.6 percent). In contrast, orders from Germany and the non-euro area rose only slightly (+1.7 percent and +1.5 percent, respectively). A two-month comparison between July / August and May / June showed an order increase of 18.9 percent. After the lockdown is loosened, the industrial recovery continues. In August, incoming orders were already slightly below the average level of the fourth quarter of 2019. However, catch-up effects on the part of international orders also played a role recently from IHS Markit / BME, still for a further recovery in the industrial economy. The catch-up process is likely to continue in the coming months. Retail trade continues to grow after a strong recovery in May The pre-crisis level has already been significantly exceeded since May. Retail sales excluding motor vehicles have been on an upward trend since May, which continued in August with a plus of 3.1 percent. Trade in motor vehicles rose again in July (+22.6 percent) and exceeded its pre-crisis level in February for the first time. New registrations of cars by private owners decreased again in September (-3.5 percent; August -7.2 percent), but a rapid increase of +87.4 percent was recorded in July. The number of new registrations by private owners recently continued to exceed the 100,000 mark per month, and early indicators suggest that the recovery will continue. The ifo business climate in retail again improved slightly in September. Overall, the positive assessments predominate. The GfK consumer climate showed a slight improvement in October. In terms of consumer prices, the temporary reduction in taxes on sales continued to have a noticeable dampening effect, as it is largely passed on to consumers. Compared to August, prices fell again (-0.2 percent), which is mainly due to the development of services and package tours. The inflation rate, the year-on-year price development, was -0.2 percent in September after 0.0 percent in August. A lower inflation rate was last reported in January 2015. The prices for energy products fell by 7.1 percent. In the case of foodstuffs (+0.6 percent), the rate of price increases continued to weaken somewhat. The price increase for services remained at 1.0 percent. The core inflation rate (excluding energy and food) was +0.5 percent in September after +0.7 percent in the previous month. Corona on the labor market still noticeable – first improvements Employment increased slightly for the second month in a row and unemployment and underemployment fell somewhat as short-time work flattened out. Seasonally adjusted employment rose by 19,000 people in August. However, it will take a few more quarters before the level before the outbreak of the corona pandemic is reached. The number of jobs and thus the demand for workers continues to grow only very slowly. Employment subject to social security contributions rose slightly in July by +5,000 people, seasonally adjusted, as in the previous month, but is almost 400,000 people below the high in February before the start of the pandemic. The downward trend in short-time work continues. It was used by 4.2 million employees in July, which is almost 400,000 fewer than in June. Registered unemployment fell in September by a seasonally adjusted 8,000 people. According to the original figures, unemployment fell to 2.85 million people. The previous year’s difference has decreased to +613,000 people. The improved survey-based leading indicators from IAB, Ifo and the BA suggest slight improvements in the labor market .————————— [1] In this report, data that were available up to October 14, 2020 are used. Unless otherwise stated, these are rates of change compared to the respective previous period on the basis of price-adjusted, calendar and seasonally adjusted data.


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