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German economy could beat credit squeeze
Published in Saudi Press Agency on 09 - 09 - 2007


Germany should be able to withstand any global
economic slowdown triggered by fears of a credit crunch with a batch
of key data Tuesday adding to expectations that Europe's biggest
economy remains on a growth track, REPORTED DPA.
While latest figures showed exports remaining the key driving
force behind German economic growth, the Ministry of Economics and
Technology reported industrial production in the country rose by a
higher-than-expected 1.7 per cent in August.
Analysts had predicted a rise in exports of just 0.5 per cent in
August after they slipped 0.3 per cent in July. Analysts had also
predicted a 0.5 per cent increase in industrial production.
"While we believe sentiment effects from the credit crisis are
likely to last another one or two months, it is difficult to become
pessimistic about Germany and the euroland yet," said Niels-Henrik
Bjorn, economist with Danske Bank in Copenhagen.
Year-on-year exports stormed ahead by 12.4 per cent in August with
strong demand from emerging economies such as China, India and the
Middle East helping to offset crimping growth in the US.
"The world economy is holding on to a solid growth course," said
Matthias Rubisch, economist with Commerzbank AG with exports rose
three per cent in August, despite the euro's climb to all-time high
and concerns that a slowing US economy could undercut global growth.
The release of the latest trade and production figures followed
the publication Monday of data showing German factory orders
rebounding in August, helped along by strong foreign demand which
rose by 2.4 per cent on the month.
However, economists believe that German economic growth could be
levelling out and that the nation will lose economic momentum as it
enters the new year.
The 1.2 per cent increase in order books in August was less than
the 2.2 per cent predicted by economists.
In August, global financial markets were also engulfed by a crisis
triggered by the upheaval in the risky US mortgage business which
prompted central banks, including the European Central Bank, to move
to shore up confidence including delaying expected rate hikes.
Nevertheless, many economists believe that slowing growth among
Germany's partners in the 13-member eurozone combined with the strong
euro will hit the nation's export machine, which was a key force in
helping the nation to emerge last year from a protracted period of
stagnation.
The euro last week hit an all-time high of 1.4283 dollars before
retreating somewhat, trading at 1.4035 dollars Tuesday morning. One
year ago, the euro was at around 1.25 dollars.
"As a result of the strong euro and the weaker economic activity
in Europe there is likely to be less impulse from exports in the
coming months," said Rubisch.
Indeed, economists have been revising down their German growth
projections with predictions that the nation's expansion rate could
drop to just under two per cent in 2008 from 2.5 per cent this year.
This in particular followed a slump in key German sentiment
surveys including business and consumer confidence, with exports
tipped to grow by about seven per cent this year about half the 13.7
per cent growth rate they chalked up in 2006.
The strength of the euro means that the US "will gain market share
at Europe's expense" said Holger Schmieding, economist with the Bank
of America.
In the meantime, Tuesday's trade data, which was released by the
statistics office showed imports rising by 5.6 per cent in August
with the nation's trade surplus narrowing to 14.1 billion euros from
17.9 billion euros in July.


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