Yesterday the DIW Berlin published their most recent short-term outlook in form of the DIW Economic Barometer, the institute’s flash indicator of the state of the German economy, for Q3 ’15. The indicator is continuously updated based on the most recent data, this time as of September 30. The overall indicator is a unitless index that is scaled to have unconditional mean of 100 (signalling normal circumstances), where smaller values signal below-average economic conditions and higher values mean above-average conditions. Historically, a value of 100 was on average associated with a q-o-q real GDP growth of 0.3%. The most recent value of the indicator is for Q3 is roughly 105 points, i.e. indicating conditions that are mildly above average.
This is also slightly higher than in the previous months, where the indicator for Q3 was 103.8 points. Still, the indicator is slightly down from its Q2 value of around 107. The team at DIW thus sees a good chance that Q3 growth might pick up again a bit climbing from 0.4 to 0.5%.
Considering the sectoral decomposition of the different contributions to the overall indicator, it becomes clear that primarily the service and labor market data (shaded in dark grey and grey) have been driving the positive trend in the indicator. This has been the recurrent theme over the course of the whole year basically. Only in the second quarter the industrial sector (green bars) chipped in an additional 1.1 index points to drive the index to its peak at around 107, but otherwise service and robust employment data were the main drivers.
With the latest quarterly value again estimated above the neutral level of 100 points, the Barometer continues a quite remarkable streak of above-average values. In fact, if one uses the interactive chart at the DIW site to zoom into the values that followed the crisis in 2009, it becomes clear that economic conditions have been above average ever since the second half of 2013.
Only in 2012, and very briefly in 2011, conditions worsened to en extent that they were below-average. Approaching the second half of 2013, the indicator entered the current streak of continuously positiive (i.e. above average) values. It therefore appears that despite some headwinds, e.g. in form of the economic weakening in China, the German economy is in a very robust shape with only little indication of a downward trend in the near future.