UPDATE 2-German exports climb in April, Bundesbank raises 2014 growth forecast

Fri Jun 6, 2014 4:19am EDT

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* German exports rise 3.0 pct in April, imports up 0.1 pct

* Industrial output climbs smaller than expected 0.2 pct

* German economy expected to slow in Q2 (Combines with Bundesbank forecasts)

By Michelle Martin and Noah Barkin

BERLIN, June 6 (Reuters) - German exports rose at the fastest pace in nearly two years in April while industrial output inched up, and the Bundesbank raised its 2014 growth forecast for Europe's largest economy.

Exports, traditionally a driver of the German economy, struggled last year and fell in two of the first three months of this year, putting a drag on overall growth.

But data from the Federal Statistics Office on Friday showed shipments abroad rebounded 3.0 percent in seasonally adjusted terms in April, their biggest increase since May 2012. That came after a drop of 1.8 percent the previous month.

"The export data signals trade may provide impetus again in the spring," said Stefan Kipar, an economist at BayernLB.

Industrial output edged up a smaller-than-expected 0.2 percent on the month as the spring rebound turned out weaker than usual due to a mild winter. But it was still an improvement compared with a downwardly revised drop of 0.6 percent in March.

Construction lagged although energy output increased.

Germany's economy is expected to grow slower in the second quarter after expanding 0.8 percent in the first - its fastest rate in three years - on the back of an unusually mild winter.

"The latest data gives no reason to doubt the underlying the fundamental strength of the German economy. However, a slowing of the economy in the second quarter is clearly in the offing," said Carsten Brzeski, an economist at ING.

He said the rise in exports could be due to earlier orders and output, adding that two disappointing months in output could point to a knock from the Ukraine crisis and Chinese slowdown while the euro zone recovery may not be robust enough yet to boost Germany's industrial sector.

Data on Thursday had shown industrial orders surging in April, and the German economy ministry said well-filled order books in manufacturing and construction, along with optimism among firms, pointed to the upward trend in output continuing.

ROBUST GROWTH AHEAD

The Bundesbank hiked its 2014 growth forecast for Europe's economic powerhouse by 0.2 percentage points to 1.9 percent thanks to strong domestic demand and kept its 2015 estimate at 2.0 percent. It predicted a 1.8 percent expansion in 2016.

"Germany's strengthened domestic economy as well as the ongoing improvement in the economic situation of the industrial countries and the gradual recovery of the euro area suggests that Germany will follow a robust growth path," Bundesbank President Jens Weidmann said.

But he also warned that growth would be restricted in future due to a tighter labour market caused by demographic change and said that in view of this, it was not helpful for the German government to press ahead with its plans to allow some people to retire on a full pension at age 63.

A breakdown of year-on-year trade data showed demand from European countries rising by 4.1 percent while exports to states outside of Europe dropped by 5.7 percent.

The trade surplus widened to 17.7 billion euros, well above a consensus forecast for 15.2 billion, as imports rose by just 0.1 percent. Economists polled by Reuters had expected exports to climb by 1.5 percent and imports to increase by 0.6 percent.

Other recent data has been mixed, with the private sector growing, unemployment increasing and yearly retail sales rising while surveys have shown business and investor morale weakening. (Reporting by Noah Barkin & Michelle Martin)

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