U.S. vs. Germany: ‘No Contest,’ says LPL’s Canally

The World Cup match should be thrilling, and stay tuned for economic outcomes, too, says John Canally

Click to enlarge. Source: LPL Financial ResearchAs the United States and Germany prepare to compete in a World Cup match on Thursday in Brazil, some sports commentators are saying that the Europeans – ranked No. 2 at the tournament – may have the advantage over the U.S., ranked 13th.

But off the soccer field, it’s really “no contest,” according to John Canally, economist and investment strategist for LPL Financial (LPLA), in a report shared Wednesday.

Figures in the chart posted here show the Americans have “Germany beat in nearly every key economic and demographic category,” he wrote. Also, the U.S. economy “is poised to outperform Germany in the years ahead thanks to better demographics, better productivity and a more focused central bank.”

“Today the U.S. economy is in far better shape than the German economy: Advantage USA,” Canally explained.

Equal Rivals?

In terms of size of their respective economies, the U.S. economy is over four times as large as that of Germany, measuring $17.1 trillion vs. $3.8 trillion.

Also, the U.S. economy has expanded 50% faster than Germany’s over the past five years.

“German banks’ lending to the private sector has dropped more than 4% over the past year. Meanwhile, the U.S. economy is benefitting from a 4.5% increase in bank lending to the private sector over the past year,” the LPL Financial expert said.

Though U.S. inflation rate is running at 2% vs. 0.6% in Germany, the United States has its own currency and central bank to wrestle with inflation. Germany, of course, shares its currency and central bank “with 17 other soccer-mad European neighbors,” Cannally joked.

Still, Germany’s unemployment rate, 5.2%, is lower than that of the U.S., 6.3%.

However, he notes, an agreement between the German government and German corporations “keeps the unemployment rate artificially low.”

Plus, the U.S. unemployment rate has fallen nearly four percentage points since 2010, while Germany’s has decreased less than three percentage points in recent years.

Soccer Stats

Germany has won three World Cups (1954, 1974 and 1990). It’s also been the runner up four times (1966, 1982, 1986 and 2002).

In contrast, the United States has never won and has reached the semi-finals only once, in 1930.

Canally says that all 23 German players are on club teams in the world’s top five professional soccer leagues (English Premier League, German Bundesliga, Spanish La Liga, Italian Serie A, and French Ligue 1).

Just nine of the 23 U.S. players are part of these leagues.

“One factor to consider is that both teams are coached by Germans. The U.S. coach, Jurgen Klinsmann, played for Germany’s 1990 World Cup winning team and coached Germany’s World Cup team in 2006. Germany’s coach, Joachim Low, never won the World Cup as a player and was Jurgen Klinsmann’s assistant coach in 2006,” the expert noted.

“On balance, while Germany may have the better soccer team, on paper at least, the U.S. economy is in far better shape than the German economy and is poised to outperform Germany in the years ahead thanks to better demographics, better productivity, and a more focused and flexible central bank,” he concluded. “Go USA!” 

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Check out World Cup and World Prices ‘Heating Up’: LPL’s Kleintop on ThinkAdvisor.

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