Brighter industrial data point to German recovery

Orders for German industrial goods rose for the sixth month in a row, data showed Wednesday, providing fresh evidence that Europe's top economy is starting to recover from its worst slump in 60 years.

Germany, one of the world's top exporters, has been hit hard by the global economic crisis as demand for goods "made in Germany" dries up, but the government is becoming ever more bullish about its recovery prospects.

On Tuesday, a government spokesman told AFP that the economy was poised to shrink by between 4.0 and 5.0 percent this year, an upward revision of a previous forecast of between 5.0 and 6.0 percent.

The economy ministry said Wednesday that German industrial orders rose a better-than-expected 1.4 percent in August from July, following a 3.1 rise the previous month.

"This means that Germany's economy is set to show strong growth in the second half of the year and the recovery is even gaining breadth at the moment," said Commerzbank analyst Ralph Solveen, interpreting the data.

Especially encouraging was the fact that foreign orders rose by 4.6 percent, outweighing a drop in domestic orders of 1.9 percent.

Carsten Brzeski from ING, said that with private consumption weak, "the manufacturing sector needs to take over the baton as the economy's main growth driver."

"Today's numbers show that this hope could become reality," he said.

Other international institutions are also becoming more bullish on the outlook for Europe's economic powerhouse.

The International Monetary Fund (IMF) recently revised up its view on Germany, forecasting a contraction in output of 5.3 percent in 2009, compared to 6.2 percent.

The European Central Bank also dramatically hiked its forecasts for the 16-country eurozone recently as Germany's main European trading partners begin to emerge from the depths of the recession.

Domestic demand is also beginning to pull its weight for the German economy.

The GfK consumer confidence index has risen for five consecutive months and the closely-watched Ifo business confidence indicator reached its highest level for a year in September.

Unemployment has not risen sharply as economists feared in the wake of the crisis, even falling in September to 8.0 percent, although experts expect jobless lines to lengthen considerably in the coming months.

In August, the country formally emerged from recession by registering output growth of 0.3 percent in the second three months of the year.

A new survey by AlixPartner consultancy showed that only one in four Germans said their personal financial situation had worsened due to the crisis, compared to almost half of the people polled in Britain and in Italy.

Nevertheless, the challenges ahead of Chancellor Angela Merkel and her new, pro-business coalition partners, the Free Democrats, are not to be underestimated.

Unemployment is forecast to rise sharply in the coming months and Germany is sitting on a mountain of debt. "The biggest problems and pitfalls are still to come," said analysts from Unicredit in a recent research note. BERLIN, (AFP)