The challenge of emerging German is bearing fruit
Positioning high-end of Germany and its strong presence in emerging markets, causing a record growth, should protect Europe's largest economy from the impact of an economic slowdown in the U.S. or its neighbors in the euro area.
During the last two decades, German companies are well established in the markets of emerging Asia and Latin America, particularly in infrastructure which these economies need to grow.Germany and last year signed a cooperation agreement with Brazil to develop the infrastructure needed to organize the World Cup soccer in 2014 and the Olympics in 2016.
Controlling the production of capital equipment up-end the German strategy was used. Indeed, the demand for these products is very strong, and machinery and commercial vehicles alone representing nearly 50% of German exports.
"We are well represented in many markets that are now very important, but which were not specifically before.We are better represented than others, "says Volker Treier, chief economist of the Chamber of Commerce and Industry (DIHK).
This good exposure to growth markets is reflected by good orders to German companies, even as mature economies like the United States, struggling to recover.
Orders in the German manufacturing sector have increased by 3.2% on month in June, after a strong second quarter showing a growth of 2.2% over the first three months of the year, the strongest growth since the reunification in 1990.
Businesses benefit directly from this favorable environment.Of the 30 groups listed on the DAX index, 23 of them have published results above market expectations in the second quarter, and 12 have raised their forecasts.
EXPORT DEPENDENCE
But the economic profile of Germany, focusing on exports, has its downside.Last year, at the height of the recession, German exports have dropped sharply, causing an economic contraction of 4.7%, higher than the average contraction across the euro area – 4.1%.
"The sensitivity to exports has struck the German economy in 2008 and 2009, and now she supports a remarkable growth," explains Niels Thygesen, professor of economics at the University of Copenhagen.
During the recession, foreign groups often had no access to funds for the purchase of German equipment, explains Volket Treier. "Often, the financial structure does not follow.(…) Now, repeat orders. "
These include small and medium businesses, often family, the famous Mittelstand, which form the backbone of the German economy.
SUPPORT HOUSEHOLD AND CONSTRUCTION
Another key factor in recovery: households.German consumers, known for their sense of savings, have supported the growth in the second quarter after starting the year marked by sluggish consumption.
The construction sector also contributed to the improved economic situation of the country, bouncing over the period April to June after a particularly harsh winter, which had greatly affected the industry.
Economists expect growth in the German economy at least 3% in 2010, prompting the country's trade unions to demand a high wage growth, after agreeing to tighten its belt during the greater part of the decade elapsed.
Such a decision would certainly erode the competitiveness of Germany, but without affecting the economy significantly.
The powerful IG Metall union calls for a wage increase of 6% to 85,000 steelworkers, a claim well above the inflation rate of 1% of Germany.