‘Golden Decade’ Beckons?

From Reuters, 24/11/10


 German investors have turned unexpectedly upbeat about the economy’s prospects for the coming months, a key survey showed last week, fuelled by growing optimism about the domestic labour market and the U.S. outlook.

The country suffered its biggest postwar recession in 2009 when its economy contracted 4.7 percent. Driven by exports and helped by stronger-than-usual consumer sentiment, it has emerged quickly from the slump and left most of its euro zone peers trailing. Austerity measures to reduce public sector deficits are squeezing activity in a number of European states. But Germany’s economy is proving more resilient than others so far to budget cutbacks, a subdued global trade environment and a strong euro. It also looks well positioned to weather debt woes hitting weaker members of the euro currency bloc, leaving economists increasingly upbeat about its future prospects.

“Looking ahead, the German economy is not only heading towards the best growth year since reunification but is also at the beginning of what could become a golden decade,” said Carsten Brzeski from ING Financial Markets. “It’s hard to find reasons for a sudden stop of the current momentum,” he added.

“Even the new sovereign debt woes and the Irish bailout should leave the German economy rather unharmed.”

Official forecasts released last month show the government expects the economy to expand by 3.4 percent this year and by 1.8 percent in 2011. Uplifted consumers may now be set to play an even greater role in the recovery — consumer morale as measured by market researchers GfK rose more than expected going into December, data released later on Tuesday showed. The rise put GfK’s headline indicator at its highest level since October 2007, painting a rosy picture for the coming Christmas shopping season and possibly giving a sign consumers may up their demand for imports from other EU countries.

Export-led recovery followed by rise in domestic demand – sound familiar?