a recent report, Deutsche Bank Research headlines that the “German
Economy (still) Churning Along Nicely,” punctuating that statement
with the following:
Despite adverse weather conditions (read “volcano”)
Germany’s economy grew 0.2% again in Q1 compared with the previous
Latest economic indicators point to strong
acceleration of growth in Q2 (in excess of +1%).
Consolidation of public finances almost worldwide
will likely mean weaker growth momentum around year-end.
Moreover, the latest crisis surrounding the euro
may hurt confidence and thus dampen the private-sector recovery.
In 2011, real GDP will probably grow by little
more than 1%, following 2% this year.
The report goes on to say:
“This year German exports have benefited
strongly from the dynamic recovery in world trade.
“Real exports of
goods and services look set to rise by slightly over 9%. However, the
momentum of world trade will probably weaken somewhat in 2011, but the
effect will likely be cushioned by a weaker euro.
“As 43% of Germany's
exports go to euro-area countries and 63% to the EU as a whole, weaker
demand as a result of the consolidation measures will make itself felt.
“All in all we
(DB) expect German export growth to slow to just over 5% in 2011.”
About the unfolding European
monetary crises, DB says:
“At this juncture,
it is difficult to predict whether the rescue package for the euro countries,
which has yet to be ratified by the individual countries, can help overcome
the crisis of confidence in the European countries' fiscal policies.
Moreover, it remains to be seen to what degree the current proposals
by the EU Commission for ex-ante supervision of government budgets and
the possibility of more severe sanctions will be implemented and contribute
to rectify the institutional shortcomings that have manifested themselves
during the Greek crisis.
“One thing is clear,
though, namely that the events of the past few weeks will have repercussions
for the both the euro area and the German economy. However, our forecast
for German economic growth of 2% this year seems to be reliable even
against the backdrop of the expected weakening in H2.
In fact, growth could
be on the upside. But next year, real GDP growth should be limited to
a good 1%.“
DB is also cautioning
against expectations for 2011, citing “heightened uncertainty”
as a factor in determining the profitability of future markets.
are based on sales prospects, cost, as well as taxes and levies. In
view of recent developments there is reason to believe that there is
now greater uncertainty regarding all three of these factors.”
DB goes on to say that
“uncertainty” can have great effect on the actions and behaviors
of consumers and investors, and that according to an analysis reached
in a Bundesbank study, “investment falls by 6 percentage points
when the volatility of cost and profit rises by a standard deviation.”
As the European monetary
crisis continues and the situation remains touch-and-go, one would be
hard pressed to assume anything for the future. Still, it is nice to
see that the German economy is plugging through it all.