German Exports Jump the Most in Almost Three Years

By Jana Randow

Aug. 7 (Bloomberg) -- German exports increased the most in almost three years in June, helping to haul Europe’s largest economy out of its worst recession since World War II.

Sales abroad, adjusted for working days and seasonal changes, surged 7 percent from May, when they rose 0.2 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest jump since September 2006. Economists expected a gain of 0.9 percent in June, the median of 10 forecasts in a Bloomberg News survey showed. Exports were still down 22.3 percent from a year earlier.

The German economy may return to growth this quarter as a global recovery boosts demand for exports and government stimulus measures support spending at home. Factory orders rose the most in two years in June and business confidence improved for a fourth month in July. The government said yesterday its forecast that the economy will contract by 6 percent this year may now be too pessimistic.

“The German economy is stabilizing and the recession is probably over,” said Stefan Bielmeier, chief German economist at Deutsche Bank AG in Frankfurt, who expects gross domestic product to grow 0.3 percent in the third quarter from the second. “It’s encouraging that imports rose so strongly, though domestic demand remains an area of weakness in Germany.”

Imports Increase

Imports rose 6.8 percent from May, when they dropped 1.9 percent, the statistics office said. The trade surplus widened to 12.2 billion euros ($17.5 billion) from 9.5 billion euros in the previous month. The surplus in the current account, the measure of all trade including services, was 13.3 billion euros, up from 4.2 billion euros in May.

Factory orders rose 4.5 percent in June from a month earlier, driven by rising export demand, the Economy Ministry in Berlin said yesterday. At the same time, industrial production dipped 0.1 percent after posting its biggest monthly gain in more than 18 years in May, the ministry said today.

“The worst is behind us, but we mustn’t become too euphoric in expecting a strong recovery,” said Alexander Krueger, head of capital markets at Bankhaus Lampe KG in Duesseldorf. “We’re only at the beginning of the stabilization.”

The International Monetary Fund on July 8 raised its estimate for global growth next year to 2.5 percent from 1.9. The Washington-based lender expects the world economy to contract 1.4 percent this year.

Government Stimulus

The government of Angela Merkel, who will seek a second term in office in national elections on Sept. 27, is spending about 85 billion euros to stimulate the economy. The measures include tax breaks and a 2,500 euro incentive for people who scrap their old cars to buy a new one.

Munich-based Allianz, Europe’s biggest insurer, on July 22 predicted the German economy will expand 2.3 percent in both the third and fourth quarters. UniCredit MIB economists yesterday raised their forecast for third-quarter growth to 1 percent from 0.3 percent.

Henkel AG, the German maker of Loctite glues and Persil detergent, said second-quarter profit more than tripled and forecast a “slightly better” performance from its adhesive unit in the next three months.

Linde AG, the world’s second-biggest maker of industrial gases, said on Aug. 3 business will pick up in the second half of the year as the global economy shows signs of improvement.

‘Better in the End’

Deputy Economy Minister Walther Otremba indicated the government may revise its forecast for a 6 percent contraction this year. “We’re pretty safe on the downside and it’s quite possible that we’ll do somewhat better in the end,” he said in an interview in Berlin yesterday. He declined to give a new forecast before October, when the government is scheduled to give its next regular outlook.

European Central Bank President Jean-Claude Trichet yesterday indicated the euro-region economy may recover sooner than previously anticipated and signaled the bank is unlikely to provide any further stimulus.

“The overall mood today is a little bit better than it was before,” Trichet said at a press conference in Frankfurt after the ECB left its benchmark interest rate at a record low of 1 percent. Still, “we are in an uncertain episode” and “I don’t exclude bumps” on the road to recovery, he said.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net.