German Economy

The German economy is losing momentum fast.  But then you would have already known that if you were following the ZEW index which leads the Ifo index.  By that measure German business confidence rose to the highest level in more than three years in September.  But it would be a mistake to infer from this that German companies can weather weaker demand from abroad as the global economic recovery slows.

After GDP bounced back in the second quarter and expanded at 2.2%, the fastest pace in two decades, factory orders declined in July and manufacturing activity eased for a second month in September.  The Bundesbank, though, claims the recovery “remains intact” and that the economy will grow 3% this year.  Companies have raised profit forecasts, but we’re more interested in what their profits are likely to be next year, after Europe has had to bail out the banks for the second time…

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