“The growth party goes on,” says Carsten Brzeski of ING Bank. The German economy expanded 1.5% in the first quarter. Strong demand for German exports in emerging markets played a key role, while notoriously cautious consumers are upping spending. Unlike in the rest of the eurozone, unemployment is low and and wage growth has improved, notes IHS Global Insight.
The figures gave Germany’s benchmark index, the DAX, another boost. It has outstripped its major rivals over the past year and gained around 7% in 2011. But FAZ.net notes that while the index looks historically reasonable on a price to earnings ratio of 11, the Ifo business confidence index, often a leading indicator for stocks, has slipped from its record high of late.
The index also reflects Germany’s reliance on emerging markets and global growth. With those markets set to slow as they battle inflation, and central banks everywhere likely to tighten policy, the market could struggle. Throw in periodic jitters caused by the euro debt crisis, and the market may go sideways for the next few months, says Markus Reinwand of Helaba.