The German economy surprised the market by beating expectations last time with a 0.7 percent growth on a 0.3 percent forecast last month. The export driven economy managed to benefit from a lower EUR and domestic think tanks have upgraded their growth forecasts. The influential Ifo institute has forecasted a 2.1 percent growth in 2015 a significant rise from the 1.2 percent estimated in the fall of last year. The German economy was able to capitalize on cheaper oil prices and a weaker currency to cut down costs and boost attractiveness of exports. Now that the wind has changed on those two for the time being, but probably not enough to affect April’s data, it will be interesting to see the German economy’s reaction to a changing environment.
The German economy is the strongest engine of growth in the Eurozone and positive growth will be good for the ECB as it can show that the much awaited QE program is bearing fruit. Greek drama has limited the effect of the QE as it has eroded business and consumer confidence. Germany will be dinged by continuing uncertainty but with strong manufacturing results it should keep growing inline with expectations.
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