Booming exports drive German growth

22nd February 2007, Comments 0 comments

23 February 2007, Berlin (dpa) - Booming exports have helped to power Germany into 2007, as a result adding to optimism about the growth outlook for the 13-member eurozone and its biggest economy. Indeed, the German economy ended 2006 on a solid note with data released Thursday showing fourth-quarter growth coming in at a real 0.9 per cent and the nation's budget deficit shrinking last year more than expected. "Altogether the outlook remains good," wrote economists from Unicredit in a note to clients about

23 February 2007

Berlin (dpa) - Booming exports have helped to power Germany into 2007, as a result adding to optimism about the growth outlook for the 13-member eurozone and its biggest economy.

Indeed, the German economy ended 2006 on a solid note with data released Thursday showing fourth-quarter growth coming in at a real 0.9 per cent and the nation's budget deficit shrinking last year more than expected.

"Altogether the outlook remains good," wrote economists from Unicredit in a note to clients about Germany's prospects.

At the same time, two key eurozone economic sentiment surveys also released Thursday came in stronger than forecast.

While French business rose in February - analysts had expected a decline - business confidence in Italy this month was above forecasts, two separate reports showed. France and Italy are the eurozone's second and third biggest economies.

Moreover, official data showed eurozone industrial orders rising sharply in December, when they jumped by 2.8 per cent from November - once again outpacing analysts' forecasts.

While European Central Bank chief Jean-Claude Trichet has signalled a rate hike next month, the recent batch of strong eurozone economic indicators is likely to help firm up expectations that the bank's 19-head governing council will hike again in June.

Coinciding with a raft of upbeat company news emerging from Germany's corporate sector, optimism has been growing that the economy will be able to withstand any adverse fallout from last month's hefty rise in value added tax and the prospects of global growth slipping back a gear this year.

On Wednesday, Germany's key stock market index, the DAX, climbed to its highest level in about seven years.

Adding to the buoyant mood on the Frankfurt bourse, shares in two of Germany's leading companies - insurer Allianz SE and chemicals giant BASF AG - surged Thursday after the two groups unveiled a big jump in profits last year.

Earlier this week, German-based Volkswagen AG, Europe's biggest carmaker, said its earnings doubled last year, helped along by the group's cost-cutting programme.

Germany's statistics office said Thursday that the budget deficit stood at 1.7 per cent of gross domestic product (GDP), which was the first time in five years that Europe's biggest economy has met the strict 3-per-cent deficit rule for euro member states.

The data showed German exports, which have been a key pillar of economic growth and have helped the nation to emerge last year from a protracted period of stagnation, bounded ahead by six per cent during the final three months of 2006.

Capital investment in Germany rose one per cent during the final three months of the year with the mild winter weather helping to boost investment in the nation's once recession-hit building sector by 1.2 per cent.

Also underpinned by a 0.3 per cent pickup in private consumption, the healthy fourth-quarter rise helped to fuel the stronger-than forecast 2.7-per-cent expansion rate in 2006. Meanwhile the unemployment rate has also edged downwards in recent months.

Data released earlier this week showed the number of people employed in Germany reached a five-year high last year.

As a result of the economic momentum built up last year, economists have been revising up their forecasts for the German economy in the coming months.

Instead of a previous consensus forecast of about 1.5 per cent, German economic growth is now expected to reach 2.0 per cent or even more this year.

The eurozone economy built around Europe's common currency is now forecast to chalk up an expansion rate in 2007 of between 2.2 per cent and 2.3 per cent.

DPA

Subject: German news

0 Comments To This Article