INTERVIEW-Open German purses lift imports from EU, expert says

Published 12/01/2010, 01:41 PM
Updated 12/01/2010, 01:44 PM

* Sees 2 pct import growth for 1 pct rise in domestic demand

* Top euro partners Holland, France, Italy stand to profit

* Top EU import products cars, machinery components

By Brian Rohan

BERLIN, Dec 1 (Reuters) - Imports to Germany should rise by two percent for every percentage point of annual growth in German domestic demand, a trade expert from the Ifo economic think tank said on Wednesday.

Rising German private consumption -- underlined earlier in the day by retail data which showed sales recording their biggest monthly gain since January 2008 -- should thus play an increasingly important role for European partners.

"China may profit the most, but the growth should be spread among top import partners -- demand for products from countries like France and Italy will surely rise," Ifo trade expert Steffen Elstner told Reuters.

An abundance of positive economic data from Europe's dominant economy in recent months has suggested that Germany will have enough momentum going into next year to ride out the debt crisis engulfing parts of the region.

European Union members like France, who have in the past decried Germany's traditionally weak consumer spending as a cause of economic imbalances within the bloc, should find some satisfaction in the news.

Germany's main sources of imports -- China, Holland, France, the U.S. and Italy according to the most recent data from September -- stand to profit the most from the fresh demand.

Domestic demand rose 0.4 percent in the third quarter, after surging 1.8 percent in the second. Signs increasingly point towards sustained growth into next year, as falling unemployment increasingly emboldens consumers.

The falling savings rate is one indicator -- data from the statistics office shows Germans were saving only 9.6 percent of their income in the third quarter, as compared to 11 percent in the second quarter and 15.2 percent in the first.

Meanwhile, the government's economic advisers expect consumer spending to grow some 1.5 pct in 2011, while the HDE retail association sees sales rising by at least 1 percent in the same year.

With around 20 percent of German imports dedicated to consumer goods, a pickup in that sub-component of domestic demand will stoke demand for products from elsewhere in Europe.

"It's mostly cars in France, and also to some extent in Spain and Italy, although there we import more machinery, equipment, and industrial components," Elstner said.

One percent of growth in German private consumption over a year, he said, leads to around 0.2 percent annual growth in imports. The figure is higher for equipment investment, where a 1 percent rise yields some 0.4 percent growth. (Editing by Andy Bruce)

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