LIGHT AT THE END OF THE TUNNEL?

Rising German Exports Hint at Recovery

05/08/2009 03:46 PM

German exports saw a surprise upswing in March, fuelling speculation that the deep recession may be bottoming out. But experts urge caution, saying it's too soon to give the all clear to Europe's largest economy.

German exports recorded an unexpected improvement for the first time in half a year in March, official data showed on Friday, sending a faint signal of hope for an economy mired in its deepest recession since World War II.

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German exports: On the mend?

Preliminary figures showed that exports, adjusted for working days and seasonal changes, rose by 0.7 percent to €66.4 billion ($88.46 billion), according to the Federal Statistics Office. Imports also posted their first monthly increase since September, climbing by 0.8 percent to €57.6 billion. Both sets of data were much more positive than experts' forecasts.

"Here are the first glimmers of hope for the German economy," Commerzbank economist Simon Junker told SPIEGEL ONLINE. "Still, we should not read too much into this one set of numbers -- it is still possible that exports decline further in the coming months before they improve. This isn't the end of the downturn."

Year-on-year figures painted a gloomier picture, with exports falling by nearly 16 percent compared to last March as demand for German goods slumped during the economic crisis. This diminishing appetite for German exports is expected to continue to drag on the German economy this year, which is expected to shrink by around 6 percent. That is an even greater contraction than the 4 percent forecast for the economy in the euro zone -- the group of 16 countries that use the euro as their currency.

Exports serve as a litmus test for Germany's economic health, accounting for a large slice of its growth. As well as making Germany susceptible to the global downturn, they are also expected to leave the country in a good position when the climate improves. "Germany has been extremely hard hit within Europe. Its exports and particularly the auto industry weighs on the economy," Junker said. "But Germany's comparative limited debt and its competitive industry leave it in a good position to rebound."

He predicts that exports would start to stabilize, with some improvement likely in the second half of the year, consolidating in 2010.

'Postive Impulses'

Adding to evidence of light at the end of the tunnel, German industrial production remained flat in March, following a year long decline, date released by the Economics Ministry also showed on Friday.

"Recent positive impulses came from the car industry that has benefited from economic stimulus measures at home and abroad," the ministry said in a statement, referring in part to the German "scrapping bonus" scheme which pays a bonus to drivers junking an old car and buying a new one.

Meanwhile, German manufacturing orders released on Thursday, unexpectedly jumped just over 3 percent between February and March. The rise, its first in seven months, also fuelled hopes that the worst of the recession may have passed.

But showing the pressure that many German manufacturers are under, the German DPA news agency reported on Friday that German auto parts company Schaeffler Group was planning a massive round of job cuts, including an estimated 5,000 losses in Germany. The company declined to comment on the report.

Meanwhile in a bid to bolster the euro zone economy, the European Central Bank on Thursday lowered its key interest rate to a record low of just 1 percent. "Behind us we have a very bad quarter, a first quarter," President Jean-Claude Trichet said at a press conference. "Clearly the second quarter will be much less negative."

jas -- with wire reports