Having experienced a narrow contraction in the fourth quarter of 2012, Germany successfully returned to positive growth territory, recording a strong 0.7% (quarter over quarter, QoQ, annualized) growth in the second quarter of 2013. Unlike many of the core and peripheral economies in the eurozone, Germany did not record a recession in the wake of the European crisis.5

Furthermore, Germany’s forward-looking indicators on manufacturing activity, measured by the manufacturing Purchasing Managers’ Index (PMI), troughed in July of 2012 at 43 and have since recorded an 8.3 point increase to 51.3 in September of 2013. This is well above the 50-point threshold that is indicative of “expansion.” Additionally, sentiment indexes have also been on the rise. In particular, the IFO sentiment indexes are signaling a potential for further acceleration in the economy’s underlying momentum. The IFO surveys on Germany’s business climate and business expectations bottomed out in October of 2012 and have since been on an uptick.6 This signals that assessments on business conditions in Germany have experienced sustained improvements in 2013.