The German economy – Europe's largest, and one of three markets highlighted in Money Morning's most recent investment-research report – is demonstrating some real muscle.
Just as we expected it to.
The country's statistics office, Destatis, said Germany's gross domestic product (GDP) expanded at a better-than-expected rate of 0.2% in the first three months of this year. The results surprised analysts, who had expected a zero-growth first quarter because of bad weather that stymied construction work.
"The German economy is slowly gaining momentum," Destatis said in a statement.
Destatis also went back and revised its estimate for Germany's performance during the final three months of last year. The statistics office – which previously said Germany endured a no-growth fourth quarter – now believes the European linchpin saw its economy expand at a 0.4% clip.
Germany was one of three economies featured in the Money Morning research report, "The Three Markets You Can't Afford to Ignore," which was distributed to our Facebook fans last week. The other two markets we featured were Singapore and Chile.
Destatis said that exports and investments in industrial equipment were the main drivers of growth. The German government has forecast growth of 1.4% for all of 2010.
Germany dropped into a recession in 2008 after the global financial crisis eviscerated demand for its exports. After contracting for four quarters in a row – including a 3.5% stumble in the first three months of 2009 – Germany emerged from recession in the second quarter of last year.
Germany surrendered its crown as the world's No. 1 exporter to China last year. But its exports are now recovering nicely: Indeed, Germany just reported that its exports for April soared 10.7% from March, and were up nearly 25% from a year ago.
And just this week, German regulator BaFin took the extraordinary step of banning naked short-selling and speculation on European government bonds with naked credit default swaps.
German officials justified the surprise, unilateral move by financial regulator BaFin by stating that the "exceptional volatility" in government debt – if accompanied by massive short-selling and naked CDS trading – could result in excessive price movements that would actually "endanger the stability of the entire financial system."
Money Morning Chief Investment Strategist Keith Fitz-Gerald says the moves angered the Wall Street investment-banking crowd. But that's okay: He said the announcements by BaFin underscore just how serious Germany is about maintaining the kind of financial order that will enable it to continue its rebound.
"Wall Street may not approve, but I certainly do," Fitz-Gerald said. "Germany's push to add some regulatory muscle is designed to calm the markets, and decrease that volatility. Based on the way the investment-banking brethren are already reacting, I think it's pretty clear that Germany's finally struck a nerve [with the Wall Street set] … It appears that Germany is the first to really see the light on this issue and that it's going to take other key economies awhile to do so."
[Editor's Note: Missed the report we're talking about? No worries … just click here – and it's yours, free of charge.]
News and Related Story Links:
- The BBC:
German economic growth beat forecasts in first quarter
- Money Morning News Commentary:
What Does Germany's Credit-Default-Swap Ban Mean for You?
German Regulatory Agency Official Website
- Money Morning Special Investment Research Report:
The Three Markets You Can't Afford to Ignore