German companies and consumers are shrugging off most of what the world throws at them.
Even under the clouds of the Greek debt crisis and tensions with Russia, unemployment is falling and confidence is rising in Europe’s largest economy. Manufacturing and services are strengthening, the pace of output growth is forecast to be sustained this year, and the inflation rate is back above zero.
Germany’s gain comes from being a relatively strong economy locked into a currency union with weaker partners including one, Greece, that could tear the bloc apart. The parlous state of the region bounced the European Central Bank into a $1.2 trillion stimulus program that sent borrowing costs and the euro plunging, to the benefit of German exporters.
“Germany is leading the charge,” said James Ashley, chief European economist at RBC Capital Markets in London.
“It’s a particularly good news story because it had good fundamentals to begin with. There’s no need for aggressive fiscal consolidation, financial balance sheets are strong and it never had the problems of the periphery.”
Data this week will probably show the nation’s joblessness continuing to drop to record-low levels, according to a Bloomberg survey of economists. The inflation rate climbed to 0.1 percent in March, after two months below zero, data from the Federal Statistics office showed on Monday.
The Ifo index of German business confidence and the ZEW gauge of investor sentiment have each risen for five consecutive months. Consumer optimism is at a record high.
The economy will grow 1.6 percent this year, according to economists surveyed by Bloomberg. That compares with 0.9 percent for France, 0.5 percent for Italy and 1.3 percent for the 19-nation euro region.
Germany’s DAX Index of stocks has risen almost 23 percent this year, outpacing a 16 percent advance by the Stoxx Europe 600. Automaker Volkswagen and chemical maker BASF have each surged more than 34 percent.
While Germany was early to implement labor-market reforms that allowed it to benefit from the euro area’s recovery, it’s getting added impetus from ECB stimulus.
An asset-purchase program that expanded three weeks ago to include sovereign debt, and which German policymakers opposed, is planned to continue at a pace of 60 billion euros a month until at least September 2016.
There’s also been an additional pickup for the economy from the drop in oil prices in the past few months.
One impact of quantitative easing and other measures, such as interest-rate cuts and cheap loans, has been a weaker euro.
The single currency has slumped more than 20 percent since approaching $1.40 in May, and was down 0.5 percent on Monday at $1.0833 at 2 p.m. Frankfurt time.
At Citigroup, economists including Guillaume Menuet in London say that Germany, along with Finland, Ireland and the Netherlands, are best positioned to benefit by “being amongst the most open and exhibiting the highest sensitivity of export growth to currency.”