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A booming stock market. Confident executives. Optimistic consumers. Who would have thought that the scene for all this jollity would be Germany?
Germans are at their most positive since last August, according to a consumer survey released on Tuesday. In some boardrooms, things seem equally rosy. Deutsche Bank reported its best quarterly profit in 14 years. The lender is one of several companies that have maintained full-year projections, as foreign rivals step back from theirs.
Lufthansa, for example, stood by its outlook for the year on Tuesday — a real rarity in the economically sensitive airline world. Adidas boss Bjørn Gulden went further after solid first-quarter earnings, saying that “in a normal world” — meaning but for US tariffs — the sportswear giant would have raised its forecasts.
Germany has one thing most countries don’t: a plan to increase government largesse. In March the country loosened its constitutional spending limits, unleashing about €1tn in potential defence and infrastructure funding that could help end years of underperformance.
The Dax has rallied more than 12 per cent this year versus slightly more than 3 per cent for France’s Cac 40 and a 6 per cent fall for the S&P 500. At 16 times the next 12 months’ earnings, the German benchmark is at levels barely reached — and never sustained for long — since the 2008 financial crisis, excepting during the wild days of the pandemic.
What could sustain it this time? Germany’s supertanker of an economy needs to show clear signs of escaping its doldrums to begin with. Key sectors such as manufacturing are showing their best activity levels in two-plus years, but are still contracting, just at a slower pace. The IMF is predicting zero growth this year and 0.9 per cent in 2026 for Germany. That’s an improvement on earlier forecasts, but hardly vibrant.
The country’s leading companies have also been the beneficiaries of global trends. Deutsche Bank’s first-quarter profitability was driven by its trading unit — a global phenomenon also powering rivals’ investment banking businesses courtesy of volatile markets. Lufthansa’s solid start to the year too, is similar to the performances reported by its more cautious rivals, even if its positive tone sounds somewhat unlike theirs.
Still, things haven’t looked this good for Germany Inc for some time. The economy and its biggest companies, helped by geopolitics, are pulling in the same direction. And with the Dax trading at about three-quarters the price-to-earnings multiple of the S&P 500, investors in other countries might be positively giddy. Germany’s long-awaited moment of corporate Frühlingsgefühle may finally be nearing.
jennifer.hughes@ft.com
