Oct. 20 (Bloomberg) -- The German economy will recover in 2004 from a three-year slump as reviving global trade boosts demand for goods made in Germany, a survey of more than 25,000 companies by the DIHK industry and trade association showed. The share of managers who expect business to get better increased to 29 percent in October from 17 percent in the DIHK's June survey. The business group, representing 3 million, mostly small and medium-sized companies, conducts three surveys a year. ``The stagnation in the economy is coming to an end,'' DIHK Executive Director Martin Wansleben said at a press conference in Berlin. ``The outlook for exports has improved and they will be one of the main pillars of the economy in 2004.'' Germany's $2.3 trillion economy emerged from its second recession in two years in the third quarter, expanding about 0.2 percent, according to Bundesbank President Ernst Welteke. The recovery may sputter should the euro extend this year's 20 percent gain against the U.S. dollar, the DIHK said.
DaimlerChrysler AG, the world's fifth-largest carmaker, has said it expects to sell as many as 15 percent more cars in Asia next year as demand in China grows. Fuchs Petrolub AG, a maker of industrial lubricants, expects increasing orders from the U.S. to boost earnings this year, Chief Executive Manfred Fuchs said in today's Financial Times Deutschland newspaper. Almost 40 percent of the companies surveyed by the DIHK said they expect exports to rise, up from 27 percent in June. German consumers will probably buy more durable goods such as dishwashers and companies may replace more machines and tools next year, underpinning the recovery, the DIHK said.
U.S. Recovery
Exports account for about a third of the German economy, Europe's largest. The U.S. economy, destination of a 10th of German sales abroad, accelerated in the second quarter. U.S. consumer sentiment rose in October, driven by a pickup in payrolls, a survey by the University of Michigan showed.
Wansleben said he expects the economy to expand ``about 2 percent'' next year, with exports alone contributing half a percentage point. The government this week will lower its growth forecast to between 1.5 percent and 1.75 percent, an official who asked not to be identified told Bloomberg News. Fluctuations in the dollar may lead to an ``uneven'' pickup of German growth, the DIHK said. The euro cost $1.1667 at 11:50 a.m. in Frankfurt, about 2 cents below its record in May. German exports depend more on a U.S. recovery than on exchange rates, a study by the IWH economic institute showed. A one percent increase in U.S. industrial production boosts German exports to the U.S. by 1.7 percent, while a 1 percent gain in the euro damps U.S. demand for German goods by only 1 percent.
`Not so Good'
Still, a further appreciation of the euro ``wouldn't be so good'' for Germany's competitive position, Hans-Werner Sinn, head of the Munich-based Ifo economic institute told reporters last week. ``Above $1.25, it gets critical'' for exporters, said Sinn, whose institute each month surveys 7,000 executives. While companies will stop cutting jobs next year, hiring won't be enough to raise employment above this year's level, the DIHK said. Six out of 10 companies are planning to keep payrolls unchanged and only 8 percent seek to hire new staff. Chancellor Gerhard Schroeder's plan to raise pressure on the unemployed to accept job offers will boost growth in the long run, though it won't lift gross domestic product next year, the DIHK said. A series of proposals on how to overhaul the social security systems has unsettled executives, it said.
Popularity Slumps
The government's plan to bring forward income-tax cuts worth about 16 billion euros to next year will only boost investors' and consumers' confidence should the government cut spending to pay for the cuts, the DIHK said. Schroeder's popularity has fallen to the lowest since he took office five years ago as unemployment rose. Germany's benchmark DAX index has gained 47 percent since Schroeder on March 14 outlined his reform plans in parliament, saying ``either we modernize as a social democracy or we will have modernization forced on us.''
The benchmark DAX rose 24.01 points, or 0.7 percent, to 3540.68 as of 11:48 a.m. in Frankfurt. Thirty-four percent of more than 25,000 companies polled by the DIHK are in industry, 34 percent in the service sector, 25 percent in trade and 7 percent in construction. The survey was mostly carried out in September, the DIHK said.//www.bloomberg.com