March 10 (Bloomberg) -- German exports rose more than expected in January as global demand drives growth in Europe's largest economy and helps fan a recovery in domestic investment.

Sales abroad, adjusted for working days and seasonal changes, gained 3.3 percent from December, the Federal Statistics Office in Wiesbaden said today in a faxed statement. Economists forecast a gain of 1.5 percent, according to the median of 12 estimates in a Bloomberg News survey. Imports also climbed.

Exporters including Bayer AG and Suedzucker AG are investing foreign profits in their domestic facilities, boosting growth in an economy that's been reliant on global demand for most of the decade. The combination may propel Germany to its best growth performance since 2000, economists say.

``We have strong momentum coming from exports and now we're seeing imports growth too, which is a sign the economy is gathering pace,'' said Peter Meister, an economist at BHF Bank in Frankfurt. ``Investments are clearing improving.''

The IfW institute yesterday raised its 2006 growth forecast and now expects the economy to expand 2.1 percent, the fastest in five years, compared with a previous estimate of 1.5 percent. WestLB projects the economy to expand 1.8 percent.

Imports rose 3 percent in January from a month year, the statistics office said. Economists expected a gain of 0.7 percent according to the median of 12 forecasts. Germany's trade surplus widened to 12.5 billion euros ($14.9 billion) in December from 9.2 billion euros in December.

Asian Power

German exports are climbing as demand across Asia powers the global economy. China and India expect their economies to grow 8 percent or more this year, more than double the rates economists forecast for the U.S., the dozen euro nations or Japan.

Germany's trade surplus widened to 12.5 billion euros ($14.9 billion) in December from 9.2 billion euros in December, the statistics office said. From a year earlier, exports jumped 13 percent, the statistics office said.

Beiersdorf AG, the German maker of Nivea skin creams, said March 2 its expansion in Asia and Eastern Europe will boost earnings this year. ThyssenKrupp AG, Salzgitter AG and other German steelmakers said March 1 they expect China and India to drive demand for their products in coming years.

``The rest of the world is growing rapidly and providing major support to the German economy,'' said Sandra Petcov, an economist at Lehman Brothers Holdings Inc.

The Organization for Economic Cooperation Development in November forecast growth of 2.9 percent in the U.S. this year, 2.1 percent in the euro region and 2 percent in Japan.

Cooling growth?

Germany's economy may nevertheless have to rely more on domestic demand next year if global growth cools. Credit Suisse Group expects the world economy to expand 4.5 percent, down from 4.8 percent in 2006, as central banks raise interest rates and China takes measures to stop its economy overheating.

The U.S. Federal Reserve on Jan. 31 lifted its main rate to 4.5 percent, the 14th straight increase, and the European Central Bank on March 2 raised borrowing costs for the second time in three months. ECB rates stand at 2.5 percent.

Germany's domestic economy is showing some signs it can cope with a global slowdown. Suedzucker, the world's largest sugar producer, is spending 1.6 billion euros ($1.9 billion) over five years on an ethanol plant in eastern Germany. Bayer, Europe's biggest plastics maker, is also spending more to update its Leverkusen plant to meet global demand.

With unemployment still close to a post-World War II high and keeping a lid on consumer spending, exports are still the mainstay of the country's economy.

The IfW yesterday forecast that growth in Germany will slow to 1.2 percent next year as export demand cools.

To contact the reporter on this story: John Fraher in Berlin at jfraher@bloomberg.net.

Last Updated: March 10, 2006 03:17 EST