Back to top

IMF Raises Its Growth Forecast for Germany: 4 Top Picks

Read MoreHide Full Article

The International Monetary Fund (IMF) recently raised its growth forecast for the German economy. Further, leading economic research institutes in Germany have stated that they expect the country to grow more than they had initially projected in 2018.

Germany’s finance ministry also stated that after the current economic slowdown, Europe’s largest economy would rebound in spring on the back of strong demand of its products in domestic and global markets. Such favorable and broadly encouraging factors make Germany a hotbed for investors. So, it would be prudent to place your bet on stocks from the Deutschland.

IMF and Germany’s Economic Institutes Raise Growth Forecast

On Apr 17, the IMF raised its 2018 growth forecast for the German economy. The international body, based out of Washington, stated that it expects Europe’s largest economy to expand at the rate of 2.5% during the current year. The current forecast is an upward revision of 0.2 percentage points from IMF’s January projection. Moreover, it also expects the 2019 projection to be around the calendar-adjusted 2%.

The current forecast closely is in-line with the 2.5% pace of growth that Germany achieved in 2017. That was the strongest growth rate experienced since 2011. Meanwhile, Germany’s government had stated in January that it expects the European giant to grow 2.4% this year.

On Apr 18, the Spring Joint Economic Forecast, published by Germany’s leading economic research institutes, predicted that the country would attain a growth rate of 2.2% in 2018 and about 2% in 2019. This projection was an upward revision from 2% and 1.8%, respectively, released in fall 2017.

Head of Economic Forecasting at ifo institute in Munich, Timo Wollmershäuser stated that Germany’s economy is burgeoning. However, “the air is getting thinner as unused capacities are shrinking,” he added, He also advised the German government against splurging too much on public spending despite a budget surplus at their disposal. Wollmershäuser reasoned that such a stance strengthens economic stability and sustainability.

Cooldown in First Quarter Momentary

Germany’s economy is largely expected to cooldown in the first quarter of 2018. The finance ministry stated that though growth might slow down, strong domestic and international demand would keep the overall economy upbeat. It also stated that an uptick in corporate investments and exports have been pivotal in boosting economic growth.

Tax revenues from the federal government and the 16 regional states increased 4.1% year over year in the January to March period. This is just below the 4.2% forecast for 2018. The cooldown in growth has been attributed to recent factors like a potential trade war, the Syrian strife as well as a decline in retail sales in the first quarter of 2018.

Further, Germany also suffered a slide in economic confidence in April, with its Zew index dipping to -8.2 this month. Zew President Achim Wambach commented on Apr 19 that the decline was the combined result of trade war concerns, the Syrian war and a dip in production and exports in the last three months. However, the government stated that all these hindrances were momentary and that the economy is expected to rebound in spring.

Labor Market Remains Upbeat

The labor market has remained intact in Germany in recent months. The jobless rate in the country dipped to a seasonally-adjusted 5.3% last month. In other words, the number of people who remained unemployed in Germany declined to below 2.5 million in the last month. There was also about 19,000 lesser number of people remaining jobless in March when compared to February.

Moreover, leading economic institutes in Germany stated that they expect the number of people employed to significantly surge to 44.9 million in 2018 from 44.3 million in 2017, with the overall unemployment rate dropping to as low as 5.2%.

4 Best Stocks to Buy

IMF’s recent forecast on Germany’s economic growth and encouraging comments from the country’s finance ministry indicate its resilience to the recent economic cooldown. Further, as the job market remains upbeat amid budget surplus and strong domestic and global demand, it calls for investing in German stocks.

In this context, we have selected four stocks that are expected to gain from Germany’s economic resilience. These four stocks flaunt a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) is a provider of dialysis and related healthcare services based out of Bad Homburg.

The expected earnings growth rate for the current year is 31.22%. The Zacks Consensus Estimate for the current year has improved 7.8% over the last 60 days. Fresenius has gained 7% in the last six months.

Deutsche Bank Aktiengesellschaft (DB - Free Report) is a Frankfurt-based provider of finance and investment related services to private, corporate as well as institutional clients.

For the current year, the expected earnings growth rate is more than 100% and the Zacks Consensus Estimate has improved 6.1% over the last 60 days. Deutsche Bank has gained 4.6% in the last six months.

Volkswagen Aktiengesellschaft (VLKAY - Free Report) is a manufacturer and seller of automobiles in Europe, North America, South America, and the Asia-Pacific regions headquartered in Wolfsburg.

The expected earnings growth rate for the current year is 18.9%. The Zacks Consensus Estimate for the current year has improved 0.6% over the last 60 days. Volkswagen has gained 20.7% in the last six months.

LEG Immobilien AG (LEGIF - Free Report) is an owner, developer and manager of residential properties in Germanybased out of Dusseldorf.

The expected earnings growth rate for the current year is 15.8%. The Zacks Consensus Estimate for the current year has improved 5.7% over the last 60 days. Volkswagen has gained more than 100% in the last six months.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

More from Zacks Analyst Blog

You May Like