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BERLIN (Reuters) - Germany's trade surplus narrowed in October to its lowest level in over half a year as exports posted meager growth in the face of weakening demand from the country's recession-hit European partners.
The figures added to evidence that Europe's largest economy will contract in the fourth quarter of the year amid a slowdown in foreign sales, long a driver of German growth.
Imports rose 2.5 percent in October, far stronger than a 0.3 percent increase in exports that followed a 2.4 percent decline in September, data from the Federal Statistics Office showed.
"The outlook may now be slowly improving with positive signals for Chinese and American growth, but the euro zone recession is likely to continue to weigh on German exports," Christian Schulz of Berenberg Bank said in a research note. "A falling trade surplus may also weaken GDP growth in Q4 further."
Germany has been an engine of growth throughout the three-year euro crisis, but weakness elsewhere in the European Union, where it sells roughly 60 percent of its exported goods, is starting to bite.
Last week, Germany's central bank slashed its growth outlook for next year, forecasting a meager expansion of 0.4 percent compared to 1.6 percent previously.
The downbeat mood was echoed on Monday in the euro zone's second largest economy. The Bank of France said it expected GDP to dip 0.1 percent in the final quarter from the third, while industrial output unexpectedly shrank in October.
For Germany too many economists expect an economic contraction in the October-December period, and some see the country entering a technical recession in early 2013 with a second consecutive quarter of falling gross domestic product (GDP).
"Given the difficult economic situation in some euro-area countries and widespread uncertainty, economic growth will be lower than previously assumed," the Bundesbank said on Friday.
It made clear however, that it did not expect a protracted slowdown.
Exports were still stronger in October than many economists had expected. In a Reuters poll they had forecast a 0.5 percent decline, while imports had been expected to push up by a more modest 0.3 percent.
The seasonally-adjusted trade surplus shrank to 15.2 billion euros from 16.9 billion in September. It was the lowest level since March, and well below a consensus forecast for it to narrow to 16.1 billion euros.
Unadjusted data showed German exports to euro zone countries declined 1.2 percent in the January-October period, compared to the prior year.
Recent data from Germany has been mixed, with industrial output slumping 2.6 percent in October, but manufacturing orders surging 3.9 percent in the same month due to strong demand from outside the euro zone.
The Munich-based Ifo institute's measure of business sentiment, the most closely-watched leading indicator for the German economy, rose in November for the first time in seven months, buoyed by hopes for strong exports outside the euro zone and robust Christmas sales.
Thomas Hessler, an economist at HSBC Trinkaus, said however that the trade data pointed to a "proper" contraction in fourth quarter contraction GDP, in the region of 0.3 percent.
Additional reporting by Alexandra Hudson and Stephen Brown; Writing by Noah Barkin; Editing by John Stonestreet