DAX max

A stockmarket milestone reflects optimism for German companies

ECONOMIC growth of 2% this year, as is expected in Germany, is hot stuff only in the context of Europe's cool climes. But the DAX index of the country's biggest listed companies is truly sizzling, closing above 10,000 points for the first time on Monday June 9th, up by 22% on a year ago and nearly treble the low it hit in March 2009. The MDAX, an index of somewhat smaller companies, has performed even better. Share-traders' enthusiasm is shared by bosses: the Ifo business-climate index, a widely watched survey of companies, shows an optimism not seen since 2011.

In recent years the run-up in German automotive and engineering firms' shares has been driven by booming emerging-market sales. Now, China's market is cooling, and the prospects for sales in Russia have been dampened by its confrontation with the West over Ukraine. However, markets closer to home are coming to the rescue: car sales in Europe have increased for eight months in a row. Volkswagen, which sold 4.4% more cars in the first five months of 2014 than in the same period last year, says western Europe is now only second to the Asia-Pacific region in sales growth, a big change from recent years.

Other German businesses may likewise see renewed vigour in domestic, European and rich-world markets, compensating for the weakening outlook elsewhere. Barclays, a bank, thinks that a long-overdue recovery in capital spending by companies in developed economies should help the country's many makers of industrial equipment and services. As examples, Barclays mentions Siemens, an engineering conglomerate, Infineon, a microchip-maker, and SAP, which makes business software.

All three have struck cheerier notes in recent results announcements. Growth in company profits tends to lag GDP growth by a couple of quarters, so Siemens expects the strong first-quarter economic figure to translate into higher sales later this year. SAP sees the packaged-software market in its Europe, Middle East and Africa region growing by more than 5% this year. Infineon expects revenue growth of between 4% and 8% in the current quarter, and thinks rising demand from carmakers and other industrial customers will drive its growth this year.

Although bosses are sounding increasingly happy about the prospects for their businesses, economists are wary. They think the hype on the stockmarket may be excessive. In particular, they worry that the decision on June 5th by the European Central Bank to push interest rates down into uncharted territory risks inflating a bubble—it was surely no coincidence that the DAX's record high came so soon after the ECB's decision.

But the industrial bosses see a positive side to the ECB's move: cutting interest rates should tend to weaken the euro, making their exports outside the currency zone more competitive and boosting their value when translated back into euros. Adidas, a sportswear-maker, says that the strengthening euro knocked a 235m dent in its sales last year.

Furthermore, with interest rates so low, German banks are falling over themselves to tempt customers with loans to buy new kitchens and take dream holidays, while loosening their loan criteria. Although retailers are not yet as cheerful as manufacturers, their spirits will be raised if the German Chambers of Commerce and Industry is correct in foreseeing a strong revival in domestic consumption. Dirk Schlotb?ller, an economist at the chambers of commerce, says geopolitical tensions and overgenerous government spending commitments should still give German businesses reasons for caution; but for now the chambers' member firms are telling him that things are looking up.