German economy pauses for breath

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Germany's recovering economy paused for breath in November when industrial output and retail sales declined, but remained on track for more growth this year, officials and analysts said on Friday.

The German trade surplus also contracted as imports reached an all-time high but the biggest economy in Europe and the number two exporter worldwide still had some reserves, the economy ministry said.

"Given a strong level of orders, the trend (higher in industrial output) should continue in the coming months," and results for the fourth quarter of 2010 should be positive as well, a statement said.

On Thursday, official data showed that industrial orders were five times higher than expected in November owing to sustained global demand for German goods such as chemicals, machine tools and vehicles.

What looks set to be a record-setting expansion of business activity in 2010 was nonetheless dialed back in November, with industrial production down by 0.7 percent on the month and retail sales losing 1.9 percent.

Analysts polled by Dow Jones Newswires had forecast a decline of 0.2 percent and an increase of 0.8 percent, respectively.

German retail sales numbers are highly volatile however, and analyst Frank Engels at Barclays Capital said the latest ones "should be taken with a grain of salt."

Consumer confidence readings, wage developments and reports from retailers "suggest that real private consumption growth should have accelerated in the second half of 2010, including surprisingly robust Christmas sales notwithstanding the adverse winter weather," he added.

Imports leapt meanwhile by 33.3 percent in November from the same month a year earlier, in part owing to higher prices for oil and other commodities, to EUR75.1 billion (97.5 billion), the national statistics office reported.

That was the highest level "since foreign trade statistics were first produced for the Federal Republic of Germany in 1950," the Destatis office added.

It referred to former West Germany, which was reunited with former East Germany in October 1990.

Destatis said German exports amounted to EUR88 billion, their highest level since October 2008, just after the collapse of the US investment bank Lehman Brothers.

Berenberg Bank chief economist Holger Schmieding reiterated his view that "Germany's economic recovery is powered by domestic demand much more than by exports," and added: "Today's data confirmed that once again."

The national trade surplus fell to EUR12.9 billion from EUR16 billion in November 2009.

"Despite the strong and sound fundamentals, the German industry is likely to fall into some kind of snow hibernation in the coming months," ING senior economist Carsten Brzeski commented.

"However, similar to last year, the strong winter will only postpone, not stop the industrial recovery."

© 2011 AFP

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