German recovery to falter as export growth slows: Reuters poll

By Sarah Marsh and Cirsten Pahlke

BERLIN (BestGrowthStock)- Germany’s strong economic recovery will slow in 2011 as export growth tails off, but rising private consumption should offer support, a Reuters poll of economists showed on Thursday.

The median forecast in the survey of around 20 economists was for the German economy, Europe’s largest, to grow by 2.0 percent in 2011 after expanding 3.4 percent this year — a sharp upgrade from forecasts of 1.6 and 2.0 percent in a poll in July.

“The German economy is going to slow down,” said Juergen Michels at Citi. “But after a recovery more or less without (domestic) consumption in the previous upswing, we now expect that consumption to contribute to growth at a very early stage.”

Germany has staged a stronger-than-expected recovery this year, outstripping its euro zone peers. The economy grew at a 2.2 percent in the second quarter, the fastest quarterly rate since reunification in 1990.

The Reuters poll reinforced expectations that growth would ease in the second half of this year, with GDP seen growing 0.6 percent in the third quarter and 0.4 percent in the fourth.

Exports, which have been the main driver behind this year’s recovery, are seen rising again in 2011, albeit at a slower pace as foreign demand eases. The poll forecast 14.7 percent growth in 2010 and 7.9 percent in 2011.

Offsetting the gain in exports and evincing growing domestic demand, imports are seen rising 7.8 percent in 2011.

“The contribution of exports is more or less neutral because of rising imports,” said Citi’s Michels. “Germany is less export-dependent than in the previous recovery.”

Private consumption, which tends to be weak in Germany, is likely to help support growth next year, rising 1.1 percent, boosted by declining unemployment and higher wages.

Germany’s jobless rate fell to its lowest level in more than 18 years in September and some say full employment may be within reach.

Economy Minister Rainer Bruederle said last week workers should reap the benefits of Germany’s swift rebound from recession with generous pay awards, citing a 3.6 percent pay hike for the steel industry as a benchmark.

With private consumption picking up and wages rising, economists also expect inflation to accelerate, according to the Reuters poll, which predicted a rate of 1.5 percent in 2011.

(Additional reporting by Christina Amann; Editing by Catherine Evans)

German recovery to falter as export growth slows: Reuters poll