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German companies and consumers are shrugging off most of what the world throws at them.
Even under the clouds of the Greek debt crisis and tensions with Russia, unemployment is falling and confidence is rising in Europe's largest economy. Manufacturing and services are strengthening and the pace of output growth is forecast to be sustained this year.
Germany's gain comes from being a relatively strong economy locked into a currency union with weaker partners including one, Greece, that could tear the bloc apart. The parlous state of the region bounced the European Central Bank into a euro 1.1-trillion ($1.2 trillion) stimulus programme that sent borrowing costs and the euro plunging, to the benefit of German exporters.
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"Germany is leading the charge," said James Ashley, chief European economist at RBC Capital Markets in London. "It's a particularly good news story because it had good fundamentals to begin with. There's no need for aggressive fiscal consolidation, financial balance sheets are strong and it never had the problems of the periphery."
Data this week will probably show the nation's joblessness continuing to drop to record-low levels and the inflation rate climbing back above zero, according to separate Bloomberg surveys of economists. Regional inflation data published before the national figures showed prices rising in six states. Three reported stagnation or declines last month.
Confidence rising
The Ifo index of German business confidence and the ZEW gauge of investor sentiment have each risen for five straight months. Consumer optimism is at a record high.
The economy will grow 1.6 per cent this year, according to economists surveyed by Bloomberg. That compares with 0.9 per cent for France, 0.5 per cent for Italy and 1.3 per cent for the 19-nation euro region.
Germany's DAX Index of stocks has risen 21 per cent this year, outpacing a 15 per cent advance by the Stoxx Europe 600. Automaker Volkswagen AG and chemical maker BASF AG have each climbed about 32 per cent. While Germany was early to implement labour-market reforms that allowed it to benefit from the euro area's recovery, it's getting added impetus from ECB stimulus.
An asset-purchase programme that expanded three weeks ago to include sovereign debt, and which German policy makers opposed, is planned to continue at a pace of euro 60 billion a month until at least September 2016. There's also been an additional pickup for the economy from the drop in oil prices.
Open economy
One impact of quantitative easing and other measures, such as interest-rate cuts and cheap loans, has been a weaker euro. The single currency has slumped more than 20 per cent since approaching $1.40 in May, and was down 0.5 per cent on Monday at $1.0840 at 1:09 pm Frankfurt time.
At Citigroup Inc, economists including Guillaume Menuet in London say that Germany, along with Finland, Ireland and the Netherlands, are best positioned to benefit by "being amongst the most open and exhibiting the highest sensitivity of export growth to currency."
That's a view echoed by Joerg Kraemer, chief economist at Commerzbank AG.
"All in all, the ECB-induced depreciation of the euro is finding more fertile ground in Germany than in the rest of the euro zone, which is still having to grapple with debt overhang and falling house prices," Kraemer said last week.
Global threats
One risk for Germany is the euro area, where another economic setback could curb demand in its biggest market. Central to the region's future is Greece, where the new government is trying to secure a deal over aid and prevent a schism in the bloc.
There is also uncertainty stemming from the conflict in Ukraine, where a cease-fire remains fragile and hasn't prevented sporadic fighting.
Nevertheless, with unemployment at a record-low 6.5 per cent, domestic demand may be maintained. The number of Germans without work probably fell by 12,000 in March, according to the median estimate of economists before data on Tuesday.
Retail sales grew almost 6 per cent between September and January, the best four-month-performance ever, according to ING-DiBa chief economist Carsten Brzeski. That's because the ECB's low interest rates are reaching German consumers, pushing their willingness to save to an all-time low, he said.
"Households have very, very strong confidence levels," said Christian Schulz, senior economist at Berenberg Bank. "Job security and wage growth are feeding the spending."
Spending will be boosted through 2015 by wage growth, which rose to 2.7 percent in the fourth quarter, comfortably above the near-zero inflation rate.
What's good for Germany should be good for the region as a whole. Euro-area economic confidence rose to the highest in more than 3 1/2 years in March, according to a separate report on Monday. That's adding weight to ECB President Mario Draghi's more upbeat assessment of the economy recently.
"Most indicators suggest a sustained recovery is taking hold," he said on March 16. "We can rightly be optimistic about the outlook."
