The German DAX index is down 20% over the past three months, which is almost half again more than the FTSE, French CAC 40, or S&P 500. There is no single reason for this, at least none given among experts about the markets. The explanation may be that Germany has more to lose in a global slowdown than almost any other developed economy. It is the only nation among these to show robust GDP expansion in the past two years. However, recent data show that growth has slowed considerably.
German gross domestic product was higher by only 0.1% in the second quarter. The healthiest European nation relies on exports of finished manufactured goods, chemicals, pharmaceuticals and software. The lack of growth among economies throughout the rest of Europe and the U.S., UK and Japan has smothered German export improvements. It has little chance to recover as some nations face or are already in a recession.
Many considered Germany’s expansion last year and early this year to be a miracle. There must have been just enough demand left for German exports after the previous recession, and a enough need for products and services among the BRICs, to help Germany maintain its economic acceleration. That is over now, though. The DAX, the beneficiary of Germany’s strength throughout its expansion, likely will continue a long harsh slump.
Douglas A. McIntyre
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