German exports, economy gain momentum

8th September 2006, Comments 0 comments

8 September 2006, BERLIN - German exports and imports surged during July, figures released Friday showed, adding to a batch of forecast-beating data pointing to Europe's biggest economy gaining momentum in recent months.

8 September 2006

BERLIN - German exports and imports surged during July, figures released Friday showed, adding to a batch of forecast-beating data pointing to Europe's biggest economy gaining momentum in recent months.

Drawn by the nation's statistics office, Friday's data showed exports rising by 2.3 percent in July, with the increase helping to both underpin the economic pickup that has emerged this year and the prospects of Germany emerging again in 2006 as the world's leading exporter.

Analysts had expected Friday's trade data to show exports rising by less than one percent in July. The latest trade data follows the release of stronger-than-expected industrial production and order books figures.

However, the round of data also underscore the key role played by Germany's export machine in powering the nation's economic growth with private consumption remaining less than sparkling and signs of emerging of the fickle mood among the nation's consumers.

Friday's data showed Germany's trade surplus in July was unchanged at EUR 11.9 billion, the statistics office said. Imports rose by 2.8 percent. Exports rose 13.4 percent from a year earlier, the data showed.

Earlier this week, Germany's Ministry of Economics and Technology reported that the nation's output jumped by a seasonally-adjusted 1.2 percent month-on-month in July, while industrial orders grew by 1.8 percent in July.

Economists had expected a rise of about 1.0 percent in industrial orders during July and a 0.5 percent increase output.

The publication of the latest series of official data coincided with the release of figures pointing to a record year for Germany's key mechanical engineering industry.

The federation of German mechanical engineering and plant equipment (VDMA) said it expects production to rise by 5.0 percent this year and to increase by at least 2.0 percent in 2007 to reach its highest level in 25 years.

However, economists expect a slowdown in the US economy to dampen global growth as the world economy enters in the new year and to underpin a rally in the euro against the US dollar.

As a result, German exports are expected to lose ground in the coming months. An analyst report released Friday by economists with Germany's Commerzbank AG predicted that the export sector's contribution to the nation's growth would be less in the third quarter.

However, the real risk for the German economy is that this scenario could take shape just as the government's plans for hiking the country's value-added tax in January hits domestic demand.

German retail sales fell by a bigger-than-forecast 1.5 percent month-on-month in July, official data showed, as the World Cup football championships drew to a close and high summer temperatures meant that consumers were reluctant to go into stores shop.

Economists had forecast a more modest 0.4 percent decline in retail sales during July.

But while a key forward-looking survey showed German consumer confidence surging to its highest level in about five years, it also pointed to the government's planned VAT increase and concerns about the economic outlook casting a shadow over consumer sentiment in the coming months.

In releasing the survey, the Nuremberg-based marketing institute GfK, warned: "The positive sentiment among German consumers appears to have reached its peak in the late summer of this year.

"Although the propensity to buy remains high, the positive sentiment regarding economic development is increasingly abating," the institute said.

That said, however, the crop of new German data is likely to add to analysts' expectations that the European Central Bank will deliver another rate hike next month, raising its benchmark refinancing rate by 25 basis points to 3.25 percent.

The latest data, followed moves by a series of economists to raise their 2006 German growth forecasts to two percent plus.

That is more than double the more subdued one percent growth rate which the German economy turned in last year.

However, slowing global growth combined with the VAT increase is expected to result in Germany's expansion rate tumbling back to one percent or below in 2007.


Subject: German news

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