Bad news for aspiring blue bloods: Because of exchange-rate fluctuations, a bottom-of-the-line Mercedes at dealerships in the United States costs about $1,500 more today than it did just last month. And prices will probably go up again soon. But is that bad news back home for West German exporters?
Not necessarily -- because, as the saying goes, if you have to ask how much a Mercedes costs, you probably can't afford the $25,000 and up these luxury sedans cost in the United States.
German manufacturers aren't worried that the taste of upper-crust Americans for luxury autos will fade because of higher prices. Unlike Japan, which specializes in exporting moderately priced consumer goods to the US, West Germany's exports to the US are primarily capital goods, such as machine tools and big-ticket products like Mercedes and BMWs.
These are less sensitive to modest price changes, since the corporations or individuals who buy them have deeper pockets.
As R"udiger von Rosen of the Bundesbank, West Germany's central bank, puts it: ``German exports don't have the same price elasticity. The demand for a Mercedes [in the US] is really something unbelievable.''
Besides Mercedes and BMW, German companies such as Siemens and Bayer BASF remain ``very competitive'' internationally, Dr. von Rosen says, having decreased their production costs and kept wage increases modest.
Germany's biggest export market, moreover, is the European Community, in which exchange rates are relatively stable. Japan's biggest market is the US. The stronger yen is a major problem for Japan; manufacturers have had to raise prices for Japanese products several times since the big drop in the dollar began last fall. This is slowing Japanese sales in the US.
``Less than 2 marks to the dollar could create some real problems,'' says Eberhard Dettweiler, economist with the Bank f"ur Gemeinwirtschaft (BfG), in Frankfurt. ``But in the DM2.3 range [where it has been hovering lately], all German exporters can live with such an exchange rate.''
So, except for concern about what might happen if the dollar continues to fall, economists and bankers interviewed here in the commercial capital of West Germany could not be more optimistic.
They say the country is poised for a major economic surge that could make the nation into the ``engine of Europe'' for 1986. In Western Europe, Dr. Dettweiler notes, ``the growth is just beginning.'' Von Rosen calls '86 the ``year of the consumer'' for his country.
The main reason for the optimism: Money is pouring into the hands of German consumers.
German's tax reform measures this year will put DM10 billion ($4.1 billion) in the hands of private German households. A round of cost-of-living wage increases will raise real household income by 3 percent, economists say. And because this is an election year in Germany, economists expect government spending to act to stimulate the economy as well.
Best of all, tumbling energy prices will translate into at least DM15 billion ($6.2 billion) in savings nationwide for the year.
Lower energy prices help in two ways. Since oil is traded in US dollars, it automatically became cheaper as the dollar began weakening last year. Then came plunging crude prices -- a godsend for a country that imports almost all its oil.
The Bundesbank recently boosted its estimates of economic growth and pegged inflation at a paltry 1.5 percent this year.
German heavy industry, moreover, remains in ``a very good, competitive situation,'' says Walter Sies, an economist with Metallgesellschaft, an engineering and mining company. ``The only real weakness is in iron and steel and house-building.''
Another trouble spot, however, is unemployment, which has failed to drop significantly. Lack of progress here may indicate that despite the booming of German industry, the creation of new jobs continues to lag.
But demographics plays a big part in this problem. Ulrich Ramm, an economist with Commerzbank in Frankfurt, notes that until the late '80s there will be 100,000 more youths entering the work force each year than there will be retirees.
After reviewing the prospects for the German economy, Dr. Ramm boldly declares: ``We will be the international frontrunner of economic growth. We expect all OECD countries -- but especially Germany -- to have very high increases in private consumption.''
Private consumption will power the German economy, just as beginning in mid-1983 German exports were the driving force and in 1984 and '85 capital spending was the stimulus.
``Now,'' says Dr. Ramm, ``our export motor is somewhat flat, but the motor of capital investment and the motor of private consumption take its place.''