German Economy Expands Again

The Ifo Business Climate Index for trade and industry in Germany rose again in March. The index reached 109.8, rising from 109.7 in February. Germany joins the U.S., China and, to a lesser extent, Japan as strengthening pillars of the global economy.

Ifo said that the German economy has begun to lose some of its momentum, but it has momentum nonetheless. That makes it an exception among nations in the eurozone. The figure is all the more impressive because of the trouble among its trading partners in the region.

Part of the growth was due to internal activity. The retailing index rose substantially. German consumers must have some degree of confidence, the data show. But the stability of consumer spending is not sufficient by itself to support German expansion. It still is substantially reliant on its export economy, and that means that other large economies are purchasing those exports. Some of the demand must come from the U.S., Japan and China. The three represent too much of global gross domestic product for it to be otherwise.

A year ago, economists assumed that the developing world would drive global GDP growth. That assumption turned out to be true to some extent. GDP growth rates in nations like Brazil and India are still impressive, but they are well off of most expectations. The opposite can be said of the developed world where economies have begun to pick up.

The consensus among economists is that the worldwide economy has broken away from the most recent huge recession and that growth has begun to take hold. There is still a chance that rising oil prices could derail that expansion. But, in the meantime, the world’s largest economies are on a modest run.

Douglas A. McIntyre