UPDATE 1-German private sector surges again in Oct, dip seen

* Germany ups 2010 growth forecast to 3.4 pct from 1.4 pct

* Economy Minister sees 2011 growth of 1.8 pct

* Domestic demand will make up almost 3/4 of 2011 growth

* Insider TV segment: http://link.reuters.com/qyh49p

By Annika Breidthardt

BERLIN, Oct 21 (BestGrowthStock) – Germany’s private sector grew
faster than expected in October, the latest in a run of strong
numbers which have raised hopes for the durability of its
recovery and prompted a doubling of official growth forecasts.

Markit’s PMI index of manufacturing and service sectors
purchasing managers rose to 56.0, with both sub-components above
forecasts. That follows strong numbers on industrial output and
confidence — boding well for the closely-watched Ifo survey on
Friday (0800 GMT).

Economy Minister Rainer Bruederle told a news conference
that a strong recovery was spreading from exports to domestic
demand and as expected lifted the government’s forecast for
growth this year to 3.4 percent this year.

Those were in line with numbers given to Reuters by a source
on Wednesday. Berlin had previously predicted 1.4 percent growth
for 2010.

Bruederle said, however, that the pace of recovery would
likely slow to 1.8 percent next year. Analysts also expect the
Ifo think tank’s forward-looking business climate index on
Friday to fall while its current indicator improves — mirroring
results of another survey this week. [ECONDE]

“After a period in accelerating mode, the German economy is
now in the overtaking lane,” Bruederle said.

“The upswing is solidly on two legs now: after important
impulses from foreign trade, the domestic economy has also
gathered speed,” said the minister.

Germany was hit particularly hard last year by the global
crisis, contracting by 4.7 percent, but surging exports and
rising domestic demand boosted it to second quarter growth of
2.2 percent, the fastest quarterly rate in reunified Germany.

Bruederle said domestic demand would provide for almost
three quarters of German economic growth next year, a clear
shift from its traditional strength in exports.

Trading partners, such as France, have in the past had a
bone to pick with Germany over its sober household spending
habits and have argued that Europe’s biggest economy was
expanding at the expense of its peers.


The Ifo headline index, pointing to business morale in six
months’ time, is seen falling to 106.5 in October from 106.8 in
the previous month, while the index on current conditions is
seen ticking up to 110.0 from 109.7.

The PMI showed burgeoning order books had led employers to
hire at the fastest pace in 2-1/2 years. [ID:nLDE69K019]

Both index components grew faster than economists polled by
Reuters had expected — manufacturing at 56.1 compared to a 54.6
forecast, and services at 56.6 compared to 54.8. Readings above
50 denote expansion.

“The numbers show the recovery will continue in Germany.
That will have a positive feedback effect on the other (euro
zone) countries,” said Ulrike Kastens, an economist at Sal.

That highlighted again the risk of Germany leaving its peers
behind in the upswing. Chris Williamson, an economist at Markit,
which compiles the PMI survey, said Germany was now growing at
least twice as fast as the overall euro zone economy.

“That means the periphery is really struggling and
increasingly so as we move into the fourth quarter,” he said.

The number of unemployed would likely fall below the key 3
million threshold next year to average 2.9 million in 2011 as a
whole, after an expected 3.2 million this year.

Government subsidies encouraging firms to shift employees to
part-time work rather than fire them during the global downturn
have helped keep the Germany labour market largely in check.

But the state should now pull out of banks, businesses and
economic rescue programmes, Bruederle said.

(Additional reporting by Gernot Heller and Brian Rohan;
editing by Patrick Graham)

UPDATE 1-German private sector surges again in Oct, dip seen