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It is getting easier to sympathise with those Germans who look at their floundering eurozone brethren and say, “Why can’t you be more like us?” Data on Tuesday showed that the German economy expanded by 0.5 per cent quarter-on-quarter in the first three months of 2012. It was the only big eurozone economy to grow, and helped the bloc to avoid a technical recession. The growth was driven by net trade (the difference between the value of exports and the value of imports), the traditional strength of corporate Germany.
How can investors get a slice of this action, given that the eurozone is in such turmoil? Answer: they already have. German equities have trounced their international rivals so far this year. The Dax index is up 10 per cent, compared with a fall of 2 per cent for the FTSE 100 and the CAC 40. Only the S&P 500 provides any competition – up 6 per cent.
German companies have been quietly globalising for years, and now have a strong and growing presence in markets outside both Germany and Europe. Siemens generates only 15 per cent of its global revenues in Germany, for example. Household products group Henkel generated 40 per cent of its €4bn of first-quarter revenue in emerging markets. The cosmetics group Beiersdorf makes at least half of its nearly €6bn in annual revenue outside Europe.
And do not forget the domestic angle. A notable factor in the latest economic data is that consumption appears to be rising. As it should be, in a country with unemployment at a 20-year low and officials ready to contemplate higher inflation, including higher wages. That should help domestic-focused companies, especially in the generally sluggish retail sector. It should also be good news for the eurozone as a whole: the German juggernaut accounts for 27 per cent of the bloc’s economy.
There are risks – the dismal state of the German banking system, for one. Investor sentiment is becoming less bullish on the economy, too, as the eurozone crisis grinds on. But a growing number of German companies can afford to ignore it.
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