German trade data bodes well for European growth

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Germany sprang a big boost to European growth prospects on Monday with trade figures showing exports and imports close to or even better than pre-crisis levels in June.

The remarkable trade figures pushed up the euro.

Berlin is to release growth figures on Friday. These will be built in large part on the trade surplus by the German economy, the European powerhouse, which surged 44 percent in June from the May level to 14.1 billion euros (18.7 billion dollars).

"This has improved chances of the German economy having grown more rapidly in the second quarter than previously assumed," Commerzbank analyst Simon Junker said.

"The German economy is bound to see its strongest quarterly growth rate since reunification" in October 1990, ING senior economist Carsten Brzeski added.

Germany suffered its worst post-war recession last year but has bounced back as growing global economies underpinned demand for goods made in Germany.

The world's second-biggest exporter after China said that provisional data showed exports rocketed 28.5 percent to 86.5 billion euros in June from the same month a year earlier, the highest level since October 2008.

Imports soared 31.7 percent to a new record of 72.4 billion euros meanwhile, an all-time peak since statistics were first compiled in 1950, the Destatis statistics office added.

In the first half of 2010, the trade surplus gained 26 percent from the same period a year earlier to 74.6 billion euros, Destatis said as Germany took the lead among European economies.

"We're seeing Germany doing better than the others right now but to some extent this is also because it did worse than the others in 2009," Deutsche Bank senior European economist Gilles Moec told AFP.

Since then, the value of goods sold has picked up markedly, in particular to Asia which puts a high value on German machine tools, autos and chemicals.

"Exports are doing so well that they are helping to produce more jobs, and more wages in Europe and this in turn is producing more domestic demand," Moec said.

Germany's current account of the balance of payments, a broad measure of all current payments into and out of the country, surged in June to 12.9 billion euros from 1.8 billion the previous month, provisional central bank figures showed.

Berlin has been criticised by France and others for not boosting consumption and relying unduly on exports, but Moec pointed out that household savings rates in Germany were actually lower than in France, Italy or Spain.

"This debate really needs to stop," Moec said.

Chancellor Angela Merkel has also been dubbed "Madame Non" by some for her perceived reluctance to launch a German stimulus package and provide emergency aid to Greece.

But "Germany is the only European country which is actually adding to the stimulus in 2010," the Deutsche Bank economist said.

Germany's diversified industrial supplier base means exports often have parts made by companies in central or eastern Europe, and also in Spain, he added.

"If Germany does well, this seems to have a very nice second-round effect on Spanish exports," Moec noted.

As for the overall economy, "the current export dynamics are not a new status quo," ING's Brzeski said. "They will eventually slow down."

Concern has risen over growth in the United States, a key trading partner, but Goldman Sachs economist Dirk Schumacher said a forecast cut in growth there "is not significant enough in our view to merit a change in our forecasts" for Europe.

German manufacturers still have well-padded order books and the industrial sector's contribution to overall growth will probably be substantial.

It "can really reap all the benefits of the rebound" worldwide, Moec said.

© 2010 AFP

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