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Business

Businesses Predict Economic Growth in 2004

An autumn survey of 25,000 companies released on Monday offers optimistic economic news: Germany may be recovering from a three-year slump.

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Exports will be the engine behind the Germany recovery, according to a new report.

The revival of global trade and the demand for German goods has led the Association of German Chambers of Industry and Commerce (DIHK) to tentatively announce that the German economy will recover in 2004 following a crippling three-year slump that has driven unemployment near the 4.5 million mark.

A survey conducted by DIHK of more than 25,000 of the 3 million, mostly small and medium-sized companies that the association represents, shows that the share of managers who expect business to get better increased to 29 percent in October from 17 percent in the last survey in June. September’s survey polled companies from industry, the service sector, trade and construction.

The accompanying report states that “The persistent stagnation of the German economy is tapering off this autumn. Exports, the engine for growth, will get back in gear again.”

Economic growth of 2 percent possible

It also states that growth of 2 percent is a possibility in 2004, depending on the reaction to the government's social reforms and the strength of the dollar, among other factors.

The report shows that around 40 percent of the companies surveyed said they expected exports to rise, up from 27 percent in June. According to the DIHK report, German consumers are likely to buy more durable goods such as dishwashers, and companies may replace more machines and tools next year, underpinning the recovery.

Ernst Welteke, the president of the Bundesbank, added to the cautious good news by releasing a statement saying Germany's $2.3 trillion economy had recovered from its second recession in two years in the third quarter of this year, expanding by about 0.2 percent.

Dollar may play its part

The DIHK offered a word of warning on the back of this news by adding that this recovery may falter should the strong euro extend its 20 percent gain against the U.S. dollar. Fluctuations in the dollar may lead to an “uneven” pickup of German growth, the DIHK cautioned.

Exports account for about a third of the German economy, Europe's largest, with one-tenth of German sales abroad going to the United States. Germany’s performance depends more on a U.S. recovery than on exchange rates, a study by the Halle Institute for Economic Research stated.

Unemployment still problematic

While the economic news remains on the optimistic side, the DIHK added that unemployment factors would continue to give Germany problems in the next 12 months. While companies will stop cutting jobs next year, hiring won't be enough to raise employment above this year's level. Six out of 10 companies are planning to keep payrolls unchanged and only 8 percent seek to hire new staff.

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