June 2, 2008 | posted by Michael Baxter in Germany, US economy |

Talking of recoveries.

You may have noticed it has become fashionable to talk Germany up again.

The day when economic booms were made of consumer borrowing may be replaced by a time when it is making things that counts.

If this is right, then Germany is sitting pretty.

House prices in Germany have barely flickered in years, meanwhile all the other indicators have been looking good.  Government spending has been falling – it is now lower than the UK’s as a percentage of GDP, the cost of re-unification has more or less been paid off, but what about that inflexible job market we used to hear about?

The latest data really is something to make you say Ja.

Germany’s unemployment has fallen below 8 per cent for the first time in 16 years.

The trouble is, of course, will it still be able to sell things abroad when the likes of the US, UK and now apparently, thanks to rising inflation, the rest, are struggling so?

9.6 per cent of Germany’s exports last year were to France, Italy bought 6.7 per cent of Germany’s sales abroad, the Netherlands 6.2 per cent.

The trouble is, lurking there between France and Italy are the US and UK – 8.5 and 7.2 per cent of exports respectively.

But maybe there is a glimmer of hope from the US too.

Latest data says that the US did not grow quite as slowly as originally thought.   Apparently, the US expanded by an annualised rate of 0.9 per cent between January and March, not 0.6 per cent as originally thought.

Most economists think the second quarter will be worse, but really the key will lie with Q3.

The general consensus is for the economy to stage a comeback, in which case Uncle Sam will have avoided recession after all.

Then again, the general consensus has been too optimistic in the past.