Chemical and auto exports pull Germany out of crisis – study

01 September 2010 15:43  [Source: ICIS news]

TORONTO (ICIS)--Strong exports of chemicals, autos and machinery in the first half of 2010 have pulled Germany out its crisis, an economic research institute said in a study on Wednesday.

However, Berlin-based DIW institute warned that Germany needed to do more to strengthen domestic demand. As one step, it could raise wages, the institute said.

Europe’s largest economy boosted exports by 18% to €458.4bn ($580.3bn) in the first six months of 2010 the year, compared with the same period last year, DIW said.

In the 2010 second quarter exports “almost exploded”, as Germany benefited from other countries’ economic stimulus measures, it added.

The main beneficiaries of the soaring exports were the chemicals, auto and machinery industries, the institute said. Those three sectors accounted for 45% of Germany’s overall exports, it said.

The main exports markets for German industrial producers were EU member states, followed by the US.

DIW research professor Mechthild Schrooten warned that permanent trade surpluses, which translated into deficits in other countries, were risky for Germany, as those deficits were not sustainable in the long run.

Germany’s export industry had benefited from years of wage restraints, but this had weakened domestic demand, Schrooten said.

In order to boost domestic demand, Germany could raise wages, in particular in its export industries, she suggested.

In an noteworthy finding, the study said that Germany's combined chemicals-pharmaceuticals industry has not had a measureable competitive advantage since 2005, despite its role as an important export driver.

The sector’s “revealed comparative advantage” – a metric that tries to measure international comparative cost advantages – was negative in the past five years, the study found.

This was due to significant changes in the pharmaceuticals sector, including new legal rules on the re-import of drugs, as well as a wave of mergers that had strengthened pharmaceuticals production outside of Germany, DIW said.

($1 = €0.79)

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