Germany to consolidate upturn in coming months-Bundesbank

BERLIN Mon Nov 18, 2013 6:03am EST

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BERLIN Nov 18 (Reuters) - Germany, Europe's largest economy, is growing solidly and its upturn will be consolidated in the coming months, helped by domestic demand and an improved global environment, the Bundesbank said on Monday.

The economy stagnated in the first quarter of 2013 and though it achieved bumper growth of 0.7 percent in the second quarter, preliminary data shows it expanded by just 0.3 percent between July and September as exports weighed on growth.

"There's a good chance that the economic upturn in Germany will be further cemented in the coming months," the central bank said in its November monthly report.

While exports lack momentum and have dampened corporate investment, many parts of the domestic economy like residential construction and private consumption - helped by a robust labour market and strong wage increases - are growing, it said.

The Bundesbank added that the feeble euro zone recovery, moderate growth in important industrial countries and a slowdown in emerging markets left shipments abroad without impetus.

Deliveries to China increased strongly during the summer months and though exports to the Asian country are likely to decline slightly this year, they will increase again in the coming years, the Bundesbank said.

"But it seems improbable that they'll reach the high rate of expansion seen in the past," the central bank warned.

As the euro zone crisis weakened demand close to home, many German firms had looked to China as a strong alternative market on which to offload their goods.

The Bundesbank said between 2009 and 2011 exports of German goods to China increased from around 37 billion euros ($50 billion) to 65 billion euros but growth in 2012 almost came to a standstill.

One reason for slower growth is the Chinese government's attempts to make the transition to an economy fired by consumption rather than investment, the Bundesbank said.

On a seasonally adjusted basis, imports should just about hold on to second-quarter levels between July and September, the Bundesbank said.

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