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ECONOMY

Galloping exports continue to drive growth

German exports rose sharply in July compared to the year before, official data showed Wednesday, providing a further boost to Europe's top economy as it bounces back from last year's crippling recession.

Galloping exports continue to drive growth
Photo: DPA

And although the pace of export growth slowed slightly compared to the month before, analysts said that exports would continue to be an important driver in Germany, the world’s second largest exporter, in the second half of the year.

Exports rose by 18.7 percent compared to July 2009, the national statistics office said in a statement, with a total of €83 billion of goods exported.

Imports also rose sharply, registering a 24.9-percent gain on the previous year with €69.5 billion of goods brought into the country.

Germany’s trade surplus of €13.5 billion was slightly lower than at the same time in 2009 but a fraction higher than the €13.1 billion economists at Dow Jones Newswires had forecast.

In June, exports soared by 28.4 percent compared to the previous year. The absolute value of goods exported (€86.4 billion) was the highest monthly value since October 2008, the statistics office said.

Compared to this month, exports declined by 1.5 percent in July and imports by 2.2 percent.

Carsten Brzeski said exports were bound to slow after the stellar performance in June but this did not presage a decline.

“All in all, after the strong surge in the second quarter, German exports are now normalising,” the analyst said.

“However, normalising does not mean stagnation. Even at a slower pace, the export sector should remain an important growth driver.”

A breakdown of the export figures showed that other European Union countries snapped up €48.6 billion worth of German goods, with €34.4 billion going to third countries.

With the economic climate in the country improving significantly, the German federation of exporters (BGA) on Tuesday doubled its forecast for exports in 2010 to growth of around 10 percent.

“Firms have shaken off their state of shock caused by the economic collapse in the previous year,” said BGA chief Anton Börner.

Germany experienced its worst recession in more than six decades last year, but has bounced back strongly, predominantly on the back of improved global demand for its exports.

Europe’s economic powerhouse registered sizzling growth figures of 2.2 percent in the second three months of the year and is expected to achieve output over the year of around three percent.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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