Out of the Gates

France and Germany announced positive Q2 GDP numbers Thursday, adding to signs a global economic recovery is well underway.

Story Highlights

  • France and Germany both reported Q2 GDP growth of 0.3%.
  •  Japan and emerging markets China, India, and Brazil are also reporting positive economic data.
  • The US is not leading the recovery—and that's ok. The improving global economy will pull the US along with it.


It's neck and neck as the race toward economic recovery gets underway. Bleachers and boxes alike are full of eager observers, watching data as it rolls in. Who will have a burst of speed around the first bend? Will there be a slow starter? Who overtakes ‘em all in the end?

We'll have to wait and see—the homestretch is a ways off. But the not-so-tacit acknowledgement this is in fact a race back to growth is in itself bullish for global stock investors. Many today focus primarily on the domestic landscape. This narrow view is detrimental—global recovery can come from anywhere, and that's a good thing.

France and Germany posted surprisingly positive second quarter growth figures Thursday—adding to increasing signs the global economy is in recovery mode. Each country reported quarter-over-quarter GDP growth of 0.3%, handily beating analyst expectations. Joined by fellow expectations-beating Italy and Spain (still contracting, but at a lesser pace), these countries contributed to the Eurozone's economic contraction slowing to -0.1% in Q2.

Positive signs from Europe serve as a reminder to investors a global view is essential. The US hasn't been first out of the recovery gates—and that's ok. The US needn't necessarily recover first for the global economy to progress—the improving global economy is more likely to drag the US along with it than the other way around. After all, the US is only one of many horses in this race, accounting for merely 24% of global GDP—still the biggest single country in the world, but not accounting for a whopping 76% of the whole.[i] That 76% is ultimately more important than the US. Superseding all this is the global economy in its totality—today's separate economies are too interconnected to think otherwise.

Aside from Europe, there are similar encouraging signs around the world. Japan's index of leading indicators improved sharply in June, logging the largest monthly increase since January 1980. Emerging markets are also a bright spot—China boasted 7.9% growth in the second quarter over the previous year. Since then, China's July industrial production rose 10.8%, and retail sales for the month increased by 15.2% annually.

And among developing economies, China's not alone: Brazil has seen six straight months of industrial output expansion, coupled with a 5.6% year-over-year rise in retail sales through June. Brazil's economy shrank 0.8% in the first quarter, but its government acted quickly to counteract the recession and credit crisis. Brazil's total credit availability in June is up 19.7% over June 2008, due in large part to the government's efforts. India's industrial production also posted growth in June: 7.8% over the same period a year ago—more than double analyst expectations—and placing Asia's third-largest economy firmly in the black.

Back on the home front, recent US trade figures show a rise in both imports and exports. This is a bullish sign when viewed on a global scale. Many focus on the balance of trade. But trade balances are only relevant when thinking of a single country. From a global view, trade will always "balance." Instead, study absolute trade levels. The more, the merrier.

The US can't always lead the race, but that's not a bad thing as long as others continue pushing forward. Global investors are best suited to cheer a global recovery—wherever it may arrive first.

[i] International Monetary Fund, as of October 2008.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.