Recession May Be Over Soon For Germany

Germany’s epic recession maybe closer to ending than you think.

The largest economy in Europe has been contracting for well over a year, but leading indicators show that businesses are beginning to bounce back with some vigor.

“The overall picture is very positive,” states a recent report from London-based research company Capital Economics.

To put this in perspective, the last time Germany’s economy saw annual growth was back in the last quarter of 2019, right before the COVID-19 pandemic brought the world to a near standstill. During the ensuing 5 quarters, the country’s economy saw annual contractions each quarter of between 2.2% and 11.3%, according to government data collated by the website.

But the malaise may spoon be over, according to Capital Economics. That would be good for German-listed stocks such as those held in the Horizons DAX Germany exchange-traded fund (ticker: DAX). The fund is up 28% over the last 12 months versus a gain of 35% for the S&P 500 index, according to data from Yahoo!

Capital Economics sees Germany growing 1.3% and 2.3% in the second and third quarters respectively. The company notes that the Ifo Business Climate Index (BCI), which measures the confidence of the business community, rose to 101.8 in June up from 99.2 in May, and 96.7 in April and March.

The services sector stood out with its strength as explained by the Capital Economics report:

  • “Activity increased particularly rapidly in the services sector in June as many hotels and restaurants re-opened. This sparked a surge in restaurant bookings, job openings and mobility, all of which showed up in high-frequency data. The retail component of the Ifo improved by its most since reunification.”

The manufacturing sector didn’t see as much of a surge in activity, “because it was already closer to full capacity,” the report says. The factory sector wasn’t as restricted by the pandemic rules as the service sector.

Still, its looking better for Germany than it has in a long while.

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