Germany – Weaker Euro Helps Early Bird

After three consecutive increases, the Early Bird fell again in June. At 30 points – down from 33 in May – it remains clearly in positive territory, however, signaling above-average economic conditions for the German economy.

One reason for the indicator’s decline in June is the steadily waning impact of monetary policy. After all, the ECB’s interest rate cuts are moving further and further into the past, and in June the central bank even raised its key interest rates slightly again. As a result, while the short-term real interest rate is still relatively low – which in itself is positive for the economy – it is slightly higher than it was a year ago, which in itself tends to slow economic growth. In addition, the global economic environment – which we measure using the PMIs for manufacturing in the U.S., China, and the eurozone (excluding Germany) – has deteriorated slightly. By contrast, headwinds from the FX market have subsided. For the first time in more than a year, the indicator of the German economy’s competitiveness – the real external value of a notional D-Mark – was again slightly lower in June than it had been a year earlier.

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