Germany may be in recession despite a wider trade surplus

Julian Harris
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HIGHER exports have bolstered Germany’s trade balance, official data showed yesterday, widening the Eurozone heavyweight’s surplus.

The positive economic news was short-lived, however, after separate data showed a decline in German industrial output -- prompting some economists to state that the core Eurozone nation could already be in the midst of a double-dip recession.

And in France the trade deficit is set for a record high in 2011, despite narrowing sharply in November on the back of Airbus exports.

“We do not expect the [French] trade deficit to improve significantly, in line with indications of slowing industrial growth in Europe but also more generally at the global level,” commented Barclays Capital in a note. “However, there is a risk that imports slowed down owing to tepid domestic demand.”

The French government expects the country’s economy to grow one per cent this year although most economists are forecasting growth much closer to zero as businesses and consumers entrench for a painful downturn.

In neighbouring Germany exports rose 2.5 per cent in November, data showed, easily beating forecasts and reversing October’s drop. The trade surplus widened to €15.1bn.

Yet industrial output for the same month was down 0.6 per cent, worse than bearish forecasts.

“Restrained orders in the manufacturing and construction sectors indicate that overall production will continue to be subdued in the coming winter months,” the economy ministry said in a statement.

And Capital Economics said in a note: “While Germany should fare better than most other Eurozone economies in the coming months,we doubt that it will avoid a recession and see GDP falling by about 0.5 per cent this year.”