Euro zone economy: Germany surprising on the upside!

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While the general consensus view is that the austerity measures in Europe as a result of large budget deficits will force the euro zone into recession next year, economic growth in Germany, Europe’s largest economy, is surprising on the upside. Growth in the second quarter accelerated to 2.2% annualised on a quarter-ago basis, while German business confidence in August rose to its highest level since July 2007. The business expectations index was marginally lower but indicates no train smash ahead.

Sources: Dismal Scientist; Plexus Asset Management.

With the IFO business expectations index leading the euro-zone GDP-weighted PMI (manufacturing and services) by approximately one month I expect both the Markit manufacturing and services PMIs for August (to be released next week) to be stable and even somewhat higher than in July.

Sources: Dismal Scientist; Plexus Asset Management; Markit (various internet sources).

The consensus may eventually prove to be right, but only time will tell.

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1 comment to Euro zone economy: Germany surprising on the upside!

  • Frank W

    Some analysts advise us that the European economic cycle typically lags the US cycle by 1 or 2 quarters. Europe means mostly Germany with some significant input from France and Italy. Thus, their expectation is for Eurozone GDP to tank by the end of this calendar year.

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