German economy waves off concerns about debt crisis (Roundup)

By Andrew McCathie Dec 8, 2010, 13:34 GMT

Berlin - Germany is ending the year amid signs that its economy has shaken off concerns unleashed by Europe's debt crisis, with key data released Wednesday pointing to the country's recovery from last year's recession gaining a solid foothold.

While exports unexpectedly fell in October, industrial production in Europe's biggest economy bounded ahead by a strong 2.9 per cent amid signs that the nation's economic upswing is broadening as domestic demand and the country's industrial sector gain ground.

'Today's figures underscore once again the clear upward trend in industry,' said Commerzbank economist Ralph Solveen, with Germany having emerged as the key driving force behind Europe's economic growth.

The latest production numbers also add to hopes that a pickup in domestic demand in Germany will help to offset a decline in exports as global economic trade slows growth and governments around the world cut state spending.

German exports fell by 1.1 per cent in October. But that came after a jump of 3 per cent in September, the statistics office said.

Moreover, year-on-year exports raced ahead by 19.8 per cent, powered ahead by booming orders from the world's emerging powerhouse economies. Exports to non-European Union such as China, India and Brazil leapt by 28.4 per cent year on year in October.

The world's leading luxury carmaker, Munich-based BMW, said its global sales raced ahead by 20 per cent last month as demand for premium autos rebounds in the key vehicle markets of China and the US.

Adding to the positive German economic news, the Ministry of Economics and Technology said Monday that the nation's factory orders rose by 1.6 per cent in October on the back of a solid rise in domestic orders.

In the meantime, shares in Frankfurt raced ahead to their highest level in 30 months Tuesday, partly boosted by optimism about Germany's economy outlook.

This also reflects the robust mood in boardrooms across the nation. German business confidence surged to a 20-year high last month, the Munich-based Ifo economic institute closely watched survey said.

'The German economy is spiralling ever higher,' said Ifo chief Hans-Werner Sinn releasing the report, which is based on a survey of 7,000 executives.

The mood among consumers also continues to brighten, with unemployment falling to an 18-year-low last month as the pickup in the economy encouraged employers to hire.

At the same time, the nation's retailers are gearing up for a buoyant Christmas period after retail sales rose at their fastest rate in almost three years in October.

Retail sales rebounded by 2.3 per cent in October, after two consecutive monthly falls, the statistics office said this month.

Germany's retail traders federation (HDE) chief Stefan Genth said last week that the nation's retailers had seen a 'dream start' to the Christmas shopping period.

Last week, Germany's central bank, the Bundesbank, said that it expects the nation's economy to post another two years of healthy economic growth after expanding by a projected 3.6 per cent this year - its fastest pace in about two decades.

This also helps to offset the downbeat economic numbers emerging from nations such as Spain, Portugal, Ireland and Greece, which have been at the frontline of Europe's debt crisis.

All four nations have also launched tough austerity plans in a bid to slash their high deficit-and-debt levels, but which are also likely to undercut their economic growth rates.

'The recovery in the German economy will continue in the next two years following the impressive catching-up process in the current year,' the Bundesbank said.

'Exports will admittedly remain the principle force behind the recovery, but external impulses are having an increasingly positive effect on the domestic economy,' the Frankfurt-based central bank said, releasing its latest forecasts.

The latest crop of figures data also represents the country's first hard economic data for the fourth quarter, as a result adding to hopes that the Germany economy will continue to turn in a solid performance as it enters the new year.

The Bundesbank sees the economy expanding by 2 per cent in 2011 before slipping back a gear to 1.5 per cent growth in 2012.