Germany had an up and down week for investors, with the DAX PERFORMANCE-INDEX (INDEXDB:DAX) pulling in only a 0.5% gain. The big news wasn’t so closely contained to the markets, however: Europe officially (and finally) pulled out of recession this week after years mired in a mess of economic trouble. Only time will tell if the troubled continent’s economy can remain that way, but for now, it’s a great sign for investors in Europe’s stocks who have suffered through years of downbeat data.
You can thank Germany for the continent’s rise. Let’s dive into what helped the region finally get on course.
Don’t count on Europe’s rise just yet
The economies of Germany and France picked up steam in the second quarter of 2013. France’s economy — the second largest in Europe — grew by 0.5%, while Germany’s economy — the largest — picked up a solid 0.7%. That was enough to lift Europe as a whole higher by 0.3% for the quarter that ended in June, finally ending the consecutive quarters of pullback from the eurozone. Even more impressive, Germany’s growth outpaced the U.S.’s second quarter by three-tenths of a percent.
That doesn’t mean that the European economy’s on safe ground for investors concerned about the big picture. Greece, Portugal, and other countries remain mired in debt, even as the latter’s economy posted a robust second quarter. Spain and Italy both remain in recession. It’s been especially tough on Germany’s exporters, as the eurozone nations are Germany’s largest trade partners. The ongoing recession has crippled trade in the bloc, and if Europe slips back, the country’s biggest companies will have to continue looking outside of the continent for international revenue.
Germany’s DIHK chamber of commerce is a little more optimistic about the country’s trade prospects. The DIHK said that it expects Germany to outstrip the U.S. as the world’s second-largest exporter later in 2013, rising to second behind only China. Germany currently controls a 7.5% stake in world trade, down from the 11% share it had in the early ’90s that helped fuel some of the country’s largest manufacturers. Germany’s exports mean a lot more to the country’s health — and the health of its businesses– than does America’s, however, so a pickup here would do wonders for investors.
It would certainly do a lot for Siemens AG (ADR) (NYSE:SI), one of Germany’s largest firms, which has seen European orders struggle lately. Siemens AG (ADR) (NYSE:SI) is already dealing with turmoil following the firing of its CEO after the firm announced last month that it wouldn’t meet its full-year profit targets. That’s not entirely surprising given how much the firm’s struggled in Europe. New orders for the company’s Europe, Africa, and Middle East segment fell by 17% last year, with orders dropping by a whopping 43% in Germany, alone.