Financial Professionals


Germany's GDP Forecast Raised


The first half of 2010 was clearly as challenging a period for the euro zone as it has experienced since the creation of the euro itself. The value of the euro sharply declined as fears of a liquidity crisis evolving into a solvency crisis rattled the global capital markets.

However, an obvious beneficiary of the crisis is Germany, the world's 4th largest economy and Europe's largest.  As the value of the currency depreciated, German exports surged, stabilizing the German economy and providing the groundwork for a V shaped recovery. This morning, the Bundesbank, the German Central Bank, provided the evidence that, in fact, the V shaped recovery is unfolding.

Highlights from the Bundesbank:

1. Raised 2010 GDP forecast to 3% from 1.9%
2. Inflation accelerated to 1.2% from 0.8% in July - a positive development - one we desire here in the U.S.
3. Producer Price Index surged to 3.7% from 1.7% in July - a positive development - one we desire here in the U.S
4. In Q2, private consumption, construction, investments and exports all rose sharply
5. Budget deficit for 2011 projected as 4% of GDP and 3% of GDP for 2012
6. Bundesbank sees no sign of credit crunch in the German economy

Euro Currency 8-19-08 to 8-19-10

Source: Bloomberg

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.