Germany – Early Bird continues to give hope

Not much news from the Early Bird: our leading indicator for the German economy stood at 35 points in August, slightly above the July figure (33 points). The global economic environment, which we track using the purchasing managers' indices for manufacturing in the US, China, and the eurozone excluding Germany, has improved somewhat. This in itself improves the outlook for German companies' export business. At the same time, the real external value of a fictitious Deutschmark was almost 2% higher than a year ago, which in turn is likely to slow down exports. There has been little change in the monetary policy environment. Monetary policy remains expansionary and is mainly responsible for the Early Bird being well above zero, indicating above-average conditions for the German economy.

This gives hope that the decline in real GDP in the second quarter was primarily a counter-movement to the relatively strong first quarter and does not mark the beginning of a new recession. Over the past 25 years, a rise in the Early Bird above zero has signaled an already occurring or imminent upturn. Exceptions were the sovereign debt crisis in the early 2010s and the coronavirus pandemic, but neither of these were “normal” recessions, i.e., they were caused by factors other than those summarized in the Early Bird. So far, everything is going according to plan in this cycle: after the Early Bird returned to positive territory in July last year, real GDP rose slightly in the third quarter for the first time after almost two years of decline.

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