Germany's Auto Market Picks Up as the DAX Runs Higher
Aug 2nd 2013 5:00PM
Updated Aug 2nd 2013 5:02PM
As bad as Europe's economy looks right now, the continent's top economy -- Germany -- is hardly suffering. The country's DAX stock index picked up another 1.3% this past week to continue what has been a strong past month, and numerous economic indicators for July have shown Germany's continued resilience in the face of Europe's recession. Does that make this tough economy a good investment? Let's check out the latest from across the Atlantic.
Will a strong economy pay off for investors?
On a day when the U.S. unemployment rate fell to 7.4%, Germany's jobless rate remains at an enviable 6.8%, far below the average European rate of 12.1% for June. That has helped Germany's economy continue its upward course as its neighbors contract amid Europe's slump. Still, chinks have appeared in the country's armor: Germany's retail sales fell by 1.5% in June after economists had predicted an uptick.
That's on Europe than it is on Germany, but it's a sign that the country won't escape the continent's contagion completely. European Central Bank President Mario Draghi expects the eurozone's economy to pick up slightly by the end of the year, which would greatly help Germany's export-heavy economy.
Indeed, the country's auto market has already begun to accelerate. New car registrations grew by about 2% in July after falling more than 8% during the first half of 2013. In good news for German automakers, new registrations are slowing their decline or even growing in neighboring countries: France saw a gain in car sales of about 1% for the month, while Italy's new car registrations declined 2% -- not nearly so bad as the previous rate.
That's all good for German auto stocks, which haven't performed all that well so far this year. BMW has lost about 2.8% year to date, but the German luxury market's upswing has brightened this firm's outlook. New registrations for BMW and Mercedes-Benz vehicles climbed nearly 13% last month, helping BMW gain on luxury competitor Audi, a subsidiary of Volkswagen , which saw new registrations in Germany fall nearly 10% over that same time.
Not that VW has to worry. For auto investors, VW is perhaps the most secure stock in Germany. The company's overseas reach has established it as a company to watch, particularly in the world's largest auto market, China, where VW maintains the No. 2 market share behind American rival General Motors. So long as VW can keep up its powerful pace overseas, it'll be able to withstand the waxing and waning European market.
Things aren't going so well for fellow German stock Siemens , however. The industrial conglomerate has been thrown into turmoil following the firm's ousting of former CEO Peter Loescher, who predicted that the company won't be able to meet its 12% net profit margin goal this year. Siemens' former CFO has stepped into the leadership role, but the transition hasn't been smooth, as credit ratings agency Fitch downgraded the company's rating from "A+" to "A." New CEO Joe Kaeser has doubled down that the company is "certainly not in crisis," but with another outlook cut on the books, something more than leadership needs shaking up at this German industrial giant.
Germany's market has begun to pick up following a gloomy start to 2013, but this may only be the beginning of a much bigger trend worldwide. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!
The article Germany's Auto Market Picks Up as the DAX Runs Higher originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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