16.12.2016 > Articles > MacroeconomicComment
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Europe’s most robust economy is showing further signs of strength

The German economy is surging again, with employment hitting a 25-year high in October. And with improving exports and capacity for increased government spending, there are signs these numbers will be sustained.

The latest employment gains continue an incredible run for the German economy since the financial crisis, where job numbers have grown every year from 2010. The record 691,000 job vacancies that remain in Europe’s largest economy are an indication of the market’s ongoing strength.

Further gains ahead

The German economy is expected to grow by 1.9% this year — the fastest in five years — according to a joint report by five of Europe’s leading economic research institutes. Growth will then ease to 1.4% in 2017, before increasing again to 1.6% in 2018.

The group says this performance will be underpinned by a strong job market supporting consumer spending, and the large intake of refugees driving increased public spending.

Looking ahead, these two influences are expected to continue. The European Commission forecasts German unemployment will fall to 4.2% by 2018, and Pew Institute research shows the country remains the primary destination for asylum seekers in Europe.

While immigration has caused social tension across Europe, the German government budget surplus ensures there is flexibility to further increase public spending to integrate newcomers into the workforce.

The other main ingredient in Germany’s solid economic performance is an improving export sector, which recorded its biggest gain in more than six years in August. While political uncertainty now clouds the export sector, British and US trade in particular, this was an important sign for an economy that draws almost half its GDP from trade.

As the country continues to negotiate political change around the world—including the uncertain future of the Eurozone—the strong base of jobs growth and public spending make Europe’s biggest player worth watching. 

If you’re looking to access the German market, consider the iShares MSCI Germany ETF (EWG), or broaden your search to other countries.

Source:Blackrock


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