Friday, April 9, 2010

Export-led recovery still alive

German exports increased by 5.1% MoM in February, almost offsetting the sharp 6.5% drop in January. At the same time, imports only increased by 0.2% MoM, from 5.6% in January. As a consequence, the trade surplus widened to 12.1 billion euro, from 8.7 billion euro in January.

Today’s sharp increase in German exports was not, yet, enough to turn net exports into a growth driver in the first quarter but it clearly shows that the export-led recovery is still in tact.

Now that all monthly data for February has been published, it is time for a brief intermediate assessment of the German economy. Indeed, the month February had something for everyone; for the advocates of a German double-dip as well as for the camp of an ongoing recovery. With disappointing industrial production, stagnating new orders and weak private consumption, first quarter growth looked set to be flat, at best. Today’s exports open the door for upcoming surprises.

Nevertheless, it would be foolish to now advocate the end of the German recovery. First of all, the jury on the first quarter is still out. While February numbers have been strongly influenced by adverse weather conditions, it only needs a little positive surprise in March to return the German economy to a positive growth path. Secondly, the largest part of the government’s public investment programs still has to reach the economy. And finally, most leading indicators point Northwards. Order books are filling, business expectations are approaching historical highs and employment has grown actually grown in the first quarter. Positive growth surprises are still in the pipeline. Under the surface of the February snow blanket, something good is brewing.

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