July 10, 2003	Thursday	Jumadi-ul-Awwal 9,1424

BERLIN, July 9: Germany’s trade surplus with the rest of the world widened in May to 10.1 billion euros from 9.2 billion euros in April as exports rose for the first time in four months, Federal Statistics Office data showed on Wednesday.

The rise in exports flew in the face of surveys showing German firms are finding it harder to sell goods abroad due to the euro’s surge against other currencies although the data also showed the surplus deteriorated in January to May as a whole.

Adjusted for seasonal factors, exports rose 3.7 per cent month on month to 54.3 billion euros ($61.2 billion), while imports rose 2.2 per cent to 44.2 billion euros.

DekaBank economist Andreas Scheuerle said the pick up in trade may have been a result of the end of distortions caused by the Iraq war, but the data was hard to interpret.

“Before the war we had an increase in imports as many companies built up stocks,” Scheuerle said.

Germany’s government blamed stock building for a surprise contraction in gross domestic product in the first quarter.

Scheuerle said he did not expect a big stimulus from net exports in the second quarter either.

“We expect at best stagnation and a decrease is also possible, which could lead to a recession after the contraction in the first quarter,” he said.

The euro hit a record high against the dollar in mid-May above $1.1930 and retested those levels in mid-June. It has since slipped to around $1.1350 but is still up some nine percent since the start of the year.

While some leading indicators for German exports, such as the Baltic Exchange’s freight indices, are hovering near record highs, analysts said the euro’s impact would begin to be felt in the coming months.

Baltic Exchange broker David Bradley said the rise in the closely-watched Baltic Dry Index was mainly being driven by demand for shipping from China.

German exports to China rose 25 percent in the first four months of this year, the Statistics Office said last week.

The BME/Reuters German purchasing managers index survey found the volume of incoming new business fell in June for the fourth consecutive month, with some panel members blaming the stronger euro.

The Statistics Office reported separately on Wednesday that steel output in June fell 7.0 percent year-on-year, bringing to an abrupt end a strong first half performance. The steel market is extremely sensitive to price.

May’s trade surplus was practically unchanged from a surplus of 10.0 billion euros recorded in May 2002.—Reuters