Wiesbaden, Germany, March 11 (Bloomberg) -- Germany's merchandise trade surplus widened in January led by exports to countries outside the dozen nations that have adopted the euro. The surplus widened to 9 billion euros ($9.9 billion) from 8.2 billion in December, the government said. Exports rose 3 percent, adjusted for seasonal changes, and imports advanced 4.1 percent. Exports outside the European Union increased almost 11 percent from a year ago. Germany's economy is struggling as unemployment at a five- year high and concerns about a potential war in Iraq sap consumer and corporate spending. Exports, which helped the economy avoid recession last year, may weaken in coming months as the stronger euro makes German products more expensive abroad, economists say. ``Exports were higher than average -- though the fact is that if the euro's strength continues then export demand will weaken,'' Joerg Lueschow, an economist at WestLB AG in Dusseldorf, said today. ``If the foundation of the economy is kicked away then a recovery is unlikely.''
The euro has gained 14 percent against the dollar in the past six months. Siemens AG Chief Executive Officer Heinrich von Pierer said in a televised interview this weekend that executives ``will really notice the effects in the coming months.'' Schering AG, the world's biggest maker of birth-control pills, has said the stronger euro will crimp profit growth in 2003. Anton Boerner, president of the BGA association of exporters, said on Wednesday, the euro could rise as much as 9 percent to $1.20 against the dollar by the end of the year.
U.S. Growth
Exports, which account for about a third of the German economy, rose as growth picked up abroad. U.S. service industries, the biggest part of the economy, grew for a 13th month in February. The world's largest economy, which buys a 10th of German exports, grew at a 1.4 percent annual rate last quarter, twice the pace reported a month ago. German imports rose in January, boosted by the higher value of oil-related products, economists said. The price of crude surged 41 percent in the past year on concern a potential war in the Middle East will disrupt supplies. ``The largest proportion of the import rise was the oil price effect,'' said Christian Jasperneite, an economist at M.M. Warburg. ``Domestic demand is not a catastrophe right now though we can't talk about a boom.''
Lowering Interest Rates
Imports rose in January amid signs the economy may pick up later this year. Retail sales climbed in January for the first time in three months and German business confidence unexpectedly gained in February. The European Central Bank last week lowered borrowing costs for the 12 states sharing the euro by 25 basis points to 2.5 percent and indicated it's ready to cut rates again to revive economic growth. A basis point is 0.01 percentage point. Investors expect cheaper credit in the next three months, interest rate futures trading shows. The rate on a three-month euro deposit maturing in June was at 2.25 percent at 10:27 a.m. in Frankfurt, compared with a three-month money market rate of 2.54 percent.
Policy makers and executives are concerned about the pace of a recovery in Germany this year. The Bundesbank on Friday said it sees the risk of ``long-lasting weakness'' in the German economy. The German chemical industry, which includes BASF AG and Bayer AG, last week cut its forecasts for output and sales this year. The German jobless rate rose to 10.5 percent in February from 10.3 percent a month previously, damping optimism among consumers whose spending accounts for more than half the economy. The IWH economic institute on Thursday cut its growth forecast for Germany to 0.8 percent from 1.1 percent previously. The current account, which includes flows of services such as tourism and payments, unexpectedly posted its first deficit since July 2001. January's deficit was 1.3 billion euros from a surplus of 6.3 billion euros a month earlier. Analysts had forecast a surplus of 2.5 billion euros. //www.quote.bloomberg.com