Thought of the day
10.07 - Germany offers global recovery a lift
Germany exports rose by a seasonally adjusted 1.4% in May, versus a consensus of 0.5%. The timing of the jump is not the most intuitive. Euro exporters have had to deal with a rising currency (up around 9% for the year against the US dollar), and with negative rhetoric on global trade from the US.
But in spite of these difficulties, data shows that German exports are still rising. Exports to outside the EU rose by 17.3% y/y, adding to compelling evidence of rebounding global demand. And with Japan, South Korea and Taiwan’s exports all up 13–15% apiece in June, it also supports the idea of a trading nation renaissance spanning Europe and Asia. Meanwhile, the growing demand for German goods overseas bolsters hopes of an eventual lift for global consumer data, most notably in the US, where retail sales fell 0.3% in May and wage growth remains subdued at 2.5% annualized.
The resilience of the Eurozone economy against a rising euro and more evidence of a persistent trade upswing support our view that global earnings per share will rise by 10–15% for 2017, and we maintain an overweight position in Eurozone and global equities.