German exports show unexpected surge

German exports have swung back to solid growth, surging by 7 per cent in June, according to data on Friday that raised hopes of an early end to the country’s recession.

The unexpectedly large rise compared with the previous month added to evidence of a “V-shaped” recovery in Europe’s largest economy. The increase in exports was the largest since September 2006.

Germany’s optimism had already been boosted by a 4.5 per cent rise in industrial orders in June, reported earlier this week, which was powered almost entirely by export orders. Together the figures suggested Germany was among the European countries benefiting most from the recent stabilisation in global economic prospects.

“Definitely more is in the pipeline in the months to come,” said Andreas Rees, economist at Unicredit in Munich.

The latest data would stop debate over whether Germany’s economic model was vulnerable because of its reliance on exports, said Jörg Krämer, chief economist at Commerzbank. The boost German exports had received was part of a “global phenomenon”, he said.

German gross domestic product in the second quarter is still thought to have contracted compared with the previous three months. But the fall is likely to have been far smaller than the 3.8 per cent first-quarter decline, and economists did not rule out a flat reading or even a return to growth when the GDP figures are released next week. That raised the possibility that Germany could beat the UK and US in coming out of recession.

No details were given in Friday's’s export data, but economists said the revival was likely to have been broad-based. However, deep scars have been left by the recession. June’s exports were 22.3 per cent lower than a year before.

Meanwhile, industrial production data for June, published separately, dashed hopes of a further rebound, falling 0.1 per cent compared with the previous month. May’s figures were revised up to show a 4.3 per cent rise in production, however. The strongest performing sectors in recent months have been those producing investment goods and “intermediate” products, shipped for completion elsewhere.

Germany’s rebound should help lift overall prospects for the 16-country eurozone. Italy provided a foretaste of eurozone GDP data, also due next week, by reporting a smaller than expected 0.5 per cent contraction in the second quarter – which was roughly in line with the contraction expected for the eurozone as a whole.

Earlier this week, the European Central Bank signalled it had become more optimistic about eurozone prospects. But Jean-Claude Trichet, president, suggested the improvements were broad-based rather than led by Germany.

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