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Germany's Global Growth Advantage
Posted on: 24 Nov 2012  |   Tags: Germany Economy , Germany Immigration ,

The economic tide may be turning in Germany. After six consecutive declines, the widely watched Ifo Business Climate index rose in November, defying economists' predictions of a continued fall. Opulentus GermanyFor Europe's biggest economy, the global picture, and in particular the performance of the U.S. and China, looks more important than the euro-zone crisis. With global growth less fragile, Germany's exports engine, itself one of the engines of the euro-zone economy, can fire up again. The improvement in the Ifo index was broad. Manufacturers, construction firms, wholesalers and retailers were all more confident both about their current situation and, in particular, their expectations for the future. While service-sector sentiment declined, this tends to lag turns in manufacturing confidence. The Ifo data corroborate a similarly unexpected rise this week in the Markit purchasing managers' index for Germany, which also showed improvement in manufacturing. True, the data still suggest the German economy may contract slightly in the fourth quarter. But it is likely to be a shallow dip, and hard GDP data so far have turned out better than survey data have suggested. Crucially, both the Ifo and PMI reports pointed to better export sentiment; Markit reported some firms were seeing stronger demand from China in particular. Exports remain a key driver of the Germany economy. But Germany isn't overly reliant on euro-zone demand—only 35% of 2011 exports went to the euro zone. The U.S. and China are the country's second- and fifth-biggest export destinations, respectively. And in both, fears over growth have moderated in recent months, with the Chinese PMI now back above the 50 level that divides contraction from expansion, and U.S. consumer sentiment and housing markets improving. The situation remains fragile. The U.S. "fiscal cliff" is perhaps the clearest danger point, although the hope is the worst effects can be avoided. China seems likely to avoid a hard landing. A fresh eruption of the euro-zone crisis can't be ruled out. But Germany seems set for gradual recovery early in 2013. And while perhaps less immediate in its effect, a better global outlook can only be good news for the rest of Europe too. Source: http://online.wsj.com/article/SB10001424127887324712504578137031572314500.html

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