Tuesday, August 21, 2012

Germany: The EU Powerhouse

Germany stands out as an economy that has basically done everything right.  Let's look at the data.

First, note that coming our of the recession, Germany was printing some impressive annual GDP growth numbers.  But, while Germany's overall growth rate is still positive, notice that it has been slowing over the last four quarters. 

Oddly enough, the lowest German unemployment reached was about 6.4%.  In the US, 5% is considered full employment; this number will change depending on the economy, but 6.4% seems high for a maximum employment reading.  This number has ticked up recently, largely because of the GDP drop.  But, that is to be expected.

In general, the pace of retail sales is positive, and is largely due to the strong growth and low unemployment.

And German industrial production has rebounded from the downturn that occurred earlier in the year.

To me, this is the strongest chart from Germany: their overall current account as a percent of GDP has been strongly positive for nearly 10 years.  Put another way, Germany is an export powerhouse.

And while the government is running a budget deficit, it's clearly under control

And, inflation appears to be under control, although the ECB is as much responsible for this as the Bundesbank.

In short, even with the GDP slowdown, German looks to be in decent shape.