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Exports, investment boost German GDP

Source: Reuters - Fri 13th Nov 2009

German economic growth accelerated in the third quarter on firmer exports and investment in equipment and construction, the Federal Statistics Office said on Friday.

Preliminary figures showed gross domestic product (GDP) grew by 0.7 percent in the third quarter, slightly weaker than a consensus forecast for 0.8 percent growth. However, the previous quarter's expansion rate was revised up to 0.4 percent.

Euro zone government bond futures edged up at the open after the release of the data which coincided with news France's economy had grown 0.3 percent in the third quarter.

The Statistics Office said private consumption had been a drag on GDP but a pick up in imports was a sign firms were rebuilding their stocks.

"The inventory cycle has just started to turn and positive news will continue" said Carsten Brzeski at ING Financial Markets. "Moreover, filling order books and accelerating global demand point to a further pick-up in economic activity."

Year-on-year, the economy shrank by 4.7 percent in the third quarter, the data showed, following a 7.0 percent drop in the April-June period.

The government expects the economy to contract by 5 percent this year. However, a senior German official told Reuters on Tuesday a stronger-than-expected recovery in the second half suggested the government's forecast may be too pessimistic.

Germany, the world's biggest exporter of goods last year, has benefited from global stimulus programmes. Industrial output made its biggest quarterly gain in September since reunification in 1990, and exports rose for the fourth time in five months. 

However, Finance Minister Wolfgang Schaeuble said on Thursday the global economy still faces an uncertain outlook and it is too soon to unwind expansive policy measures.

German businesses are also cautious and investor confidence deteriorated more than expected in November.

German consumer goods group Henkel, which makes about half its annual sales with products like Persil detergent, Pril washing up liquid and Fa shower gel, said on Wednesday that markets had stabilised but it saw no quick economic rebound.

"There are still no clear signs of any imminent economic upturn, but markets have stabilised at a low level" Henkel Chief Executive Kasper Rorsted said.

Consumers typically cut spending on big-ticket items such as cars or TV sets if they think their job is at risk, but only adjust their budget for basic needs such as Henkel's personal care products once they become unemployed.

Schaeuble told parliament on Thursday: "Risks factors for the economic recovery are above all the significant rise in unemployment that we must expect next year... and there remains the threat of a shortage of credit, or a credit crunch."

The government expects growth of 1.2 percent next year.

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