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By Dave Graham
BERLIN, Dec 9 (Reuters) - Germany's trade surplus widened in October, suggesting net trade may support the economy in the final quarter, but the outlook for exports remains bleak with orders for German goods falling sharply in recent months.
Adjusted for seasonal swings, the trade surplus rose to 15.8 billion euros ($20.43 billion) as imports declined more sharply than exports, Federal Statistics Office figures showed on Tuesday. A surplus of 14 billion euros had been forecast.
The October trade surplus was well above the monthly average in the July-September period and Sebastian Wanke, an economist at DekaBank, said foreign trade had supported the German economy at the start of the quarter.
However, forward-looking indicators show foreign demand for German goods has crumbled since the start of the year, and the latest data underlined the weakness of economies such as Britain, Germany's biggest trading partner.
"We will see a significant decline," Wanke said. "It's just going to come a bit later than we thought."
Data on Friday showed German manufacturing orders fell more than six percent in October after a record decline the previous month, stirring fears that the German economy could next year face its biggest contraction since World War Two.
Net trade in the third quarter shaved some 1.7 percentage points off gross domestic product (GDP), which contracted by 0.5 percent, putting Germany into recession.
Orders have fallen nearly every month since the end of last year. Sentiment among manufacturers is deteriorating rapidly, with each new day bringing another round of bad news.
As a leading producer of investment goods, Germany was likely to be hit hard by the global slowdown in 2009, said Ulrike Kastens, an economist at Sal. Oppenheim in Cologne.
"Next year we expect a decline in exports of about 3 percent. That is not a competitiveness problem but (the result of) weakness in demand," she said.
CRISIS
On Monday, German brake pads maker TMD Friction said it would file for insolvency for four domestic plants, citing the global financial crisis and the collapse in automotive markets.
Carmaker Daimler AG said its main plant in Sindelfingen would adopt a shorter work week for three months.
Thorsten Polleit, an economist at Barclays Capital, said Germany was "standing on the brink of the crisis."
"Significant changes in the structure of production are looming for the world economy. That will especially hit Germany as an exporter," Polleit said.
A breakdown of the trade data showed exports fell by 0.5 percent month-on-month in adjusted terms to 84.5 billion euros, while imports were down 3.5 percent to 68.7 billion euros.
Year-on-year exports rose by 1.4 percent in unadjusted terms. Imports climbed by 5.4 percent.
Exports to European Union countries outside the euro area, such as Britain, were down by 2.1 percent on the year.
The pound has weakened steadily against the euro since the financial crisis began in 2007, making German goods more expensive in Britain. The British currency's decline has accelerated since October, suggesting the next set of German trade data could reflect a further drop in UK demand.
Exports were strongest to countries outside the EU, rising by 5.2 percent on the year.
In the first 10 months of the year exports were up by 5.7 percent, while imports rose by 8.2 percent. (Additional reporting by Madeline Chambers and Rene Wagner; Editing by Ruth Pitchford)