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TRADE

Exports grow at record pace in 2010

Germany's trade surplus grew by 11.2 percent in 2010 as exports leapt by a record 18.5 percent, but Europe's biggest economy also bought more from neighbours as it bounced back from a historic recession, data showed Wednesday.

Exports grow at record pace in 2010
Photo: DPA

The value of German exports rose to €951.9 billion ($1.3 trillion), the national statistics office said, while Berlin’s trade surplus climbed to €154.3 billion.

It was the biggest annual rise in exports since Germany’s reunification in late 1990 and the biggest for the former West Germany since 1974, a Destatis spokesman told news agency AFP. It was also the third highest level of exports ever after 2008 and 2007, he added.

But Germany, the world’s second biggest exporter after China, also took in imports worth €797.6 billion, the Destatis office said, a jump of 20.0 percent from the level in 2009.

Germany has been criticized by eurozone partners for not buying more goods from them but a breakdown of the data showed imports rose faster than exports for both the eurozone and broader 27-member European Union in 2010.

German exports to eurozone partners, which numbered 15 last year, grew by 12.7 percent while imports were up by 16.7 percent.

For the full EU, German exports gained 14 percent, but imports rose by 17.5 percent.

“Strong growth of the German economy is also having a positive effect in our neighbouring countries,” Commerzbank analyst Ulrike Rondorf noted.

“Solid domestic demand is pushing imports up, including imports from the eurozone,” she said.

Almost 60 percent of German exports last year went to fellow EU member countries, while they accounted for 63 percent of German imports.

Officials in Berlin expect the German economy to grow by 2.3 percent and the public deficit to fall back below the EU limit this year to 2.5 percent of gross domestic product (GDP).

The country suffered its worst post-war recession in 2008-2009 but roared back last year with growth of 3.6 percent, the best result since its reunification.

“Our recovery stands on two strong legs, trade and domestic demand,” Economy Minister Rainer Brüderle said Wednesday in a statement. The economy “is now in full bloom,” he added.

German growth has often been driven by exports, but falling unemployment, higher wages and increased corporate investment have raised hopes that domestic demand could help underpin a sustained expansion of activity.

In December, German exports nonetheless grew by 0.5 percent on a monthly basis while imports fell by 2.3 percent.

China is growing in importance as a trade partner, but eurozone countries, others in eastern Europe and the United States are also key buyers of products made in Germany, ING senior economist Carsten Brzeski noted.

“It is this diversification which should be a warrantor for further export strength in 2011,” he said.

Meanwhile, the country’s annual balance of payments, a broad measure of trade in goods and services and financial transfers, gained 8.3 percent last year to a surplus of €129.9 billion, data provided by the German central bank showed.

AFP/rm

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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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