What's going on?

Data out on Friday showed Germany’s economy bounced back into growth last year, and here�s hoping the wurst is behind the country.

What does this mean?

Germany�s economy went from shrinking 4.6% in 2020 to growing 2.7% last year. That�s a definite improvement, but it�s still way behind the 4.5% economists are expecting from France, Italy, and Spain. Then again, Germany�s economy is much more dependent on manufacturing, which has been hit hard by supply bottlenecks over the past year ��not least the chip shortage that forced its carmakers to furlough a fifth of their workers. Mix in the country�s highest inflation in 30 years, and you can see why Germany might end up lagging behind. Still, there might be light at the end of the Eurotunnel: Germany�s central bank thinks the country�s economy will surge after spring and grow 4.2% this year.

Why should I care?

The bigger picture: It�s not just Germany.
It can�t be easy for Germany to see an ex (a Brex?) doing so much better, with data out on Friday showing that the UK economy returned to pre-pandemic levels in November. The country�s services, manufacturing, and construction sectors all grew more than expected between October and November. Issue is, the data reflects a pre-Omicron state of affairs, and economists aren�t optimistic about what�s happened since: they reckon the economy will actually have shrunk in December and January.

For markets: In for a penny�
That data could convince the Bank of England that the UK economy is strong enough to raise interest rates again next month ��something the European Central Bank seems determined to avoid until 2023. And since the prospect of higher interest rates � and therefore higher returns on investments ��makes a country�s currency more attractive to international savers and investors, the British pound has found itself hovering around its highest level relative to the euro in two years.