Outlook brightens as German trade picks up

Author thumbnail
Outlook brightens as German trade picks up

The economic outlook for Germany is brightening, its central bank said Friday, as improved trade data suggested Europe's biggest economy is slowly leaving its recent weakness behind it.


"The outlook for the German economy has become brighter again following the slowdown towards the end of 2012," the Bundesbank wrote in its June monthly report.

Despite continued tensions in the euro area, Germany could soon see a modest upturn as investment picks up again and exports -- traditionally the main engine of economic growth -- gain momentum, the central bank wrote.

"Although there has been no fundamental change in the underlying conditions, there has, above all, been no major deterioration either," the report said.

"Moreover, the world economy should pick up again in the course of this year. In the euro area, too, the economy appears to be bottoming out."

Just a day before, the European Central Bank tweaked its growth forecasts for the eurozone as a whole, predicting a contraction of 0.6 percent this year, but a return to growth of 1.1 percent next year.

For its part, the Bundesbank predicted that German gross domestic product would expand by 0.3 percent in 2013 and 1.5 percent in 2014.

That represents a slight downward revision from the previous forecasts in December when the central bank had been pencilling in growth of 0.4 percent and 1.9 percent respectively.

German growth, which shuddered to a halt at the end of last year, picked up only slightly to a meagre 0.1 percent in the first three months of this year.

The Bundesbank blamed that on "the especially persistent winter weather." In the second quarter, however, "the improved underlying trend should come to the fore, reinforced by catch-up effects," it said.

Industrial capacity would be "well utilised, the labour market would be buoyed by economic activity, and, given the currently planned fiscal policy course, the general government budget would be balanced," the Bundesbank continued.

It warned however, that the risks to this forecast "are largely on the downside."

"Much will depend on whether the economic situation stabilises in the euro-area crisis countries and whether expansionary forces will gain the upper hand there," it said.

The Bundesbank said that letting up on consolidation and reform efforts would have a negative effect on financial markets.

Also Friday, the economy ministry and the national statistics office Destatis published better-than-expected trade and industrial output data which underscored the scenario of a nascent recovery.

Industrial output grew by 1.8 percent in April, after already adding 1.2 percent the previous month.

Destatis calculated that German exports rose 1.9 percent from a month earlier in seasonally-adjusted terms to €93.1 billion, Destatis said. Imports rose by a slightly stronger 2.2 percent to €75.4 billion.

That meant the trade surplus inched up fractionally to €17.7 billion in April from €17.6 billion in March, the statisticians calculated.

The better than expected data was "positive news" and "a sign that the foreign trade is gaining momentum after the weak performance in the first quarter," said Natixis economist Johannes Gareis.

On a 12-month basis, exports grew by 8.5 percent year-on-year while imports advanced by 5.2 percent, Destatis said.

A breakdown showed that exports to eurozone countries increased by 4.3 percent year on year, while exports to countries outside Europe soared by 13.6 percent, "underscoring the view that Germany is counting on stronger demand from non-European markets," Gareis said.



Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also