April 19 (Bloomberg) -- Germany is experiencing an upswing that will help drive down unemployment and narrow the budget deficit even as the European debt crisis continues to pose the biggest threat to growth, the leading economic institutes said.
Europe’s biggest economy will expand 0.9 percent this year, up from a prior estimate of 0.8 percent, the four groups including Munich-based Ifo said today in their twice-yearly economic outlook for Chancellor Angela Merkel’s government. The economy will grow 2 percent in 2013, they said.
“Growth impulses in the German economy will win the upper hand” from mid-year after showing weaker expansion in the first half, said the institutes, citing low interest rates, falling unemployment and steady growth in demand for its products. Germany will exploit its attractiveness as a “safe investment harbor” as doubts over the crisis prevail.
The report underscores the growing disparity between Germany and the rest of Europe as the debt crisis resurfaces to buffet Spain and Italy. Merkel’s Cabinet approved budget projections yesterday that showed Germany will effectively eliminate its deficit in 2014, two years ahead of a deadline set in the constitution. That contrasts with Italy, which pushed back its balanced-budget goal by a year the same day.
Spain and France sold 13.05 billion euros ($17 billion) of debt today, meeting their targets, though both faced rising borrowing costs. Investor scrutiny of both countries is increasing as the effect of the European Central Bank’s injection of more than 1 trillion euros into the banking system fades.
Spain sold 2.54 billion euros of two- and 10-year securities and France raised 10.5 billion euros in debt out of an 11 billion-euro goal. The yield on the 10-year Spanish benchmark was 5.743 percent compared with 5.403 percent when it last sold in January. France’s five-year notes had an average yield of 1.83 percent today, up from 1.78 percent on March 15.
For Germany, the ECB’s measures, aimed primarily at preventing the insolvency of states in southern Europe, are a little recognized boon, the institutes said today.
The ECB’s liquidity measures and its 1 percent benchmark interest-rate are helping German companies leverage their competitive advantages over their partners in Europe, they said. Based on comparative costs, German companies are their most competitive in 30 years, the group said.
An 8 percent drop in the value of the euro against the dollar since October also improves the competitiveness of German goods outside the euro area and helps exporters take advantage of the global recovery, the institutes said. They forecast global trade to grow 4.4 percent in 2012 and 6.6 percent in 2013.
In Asia, Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit, aiding prospects of a sustained recovery in the world’s third-biggest economy.
Boosted by car exports to the U.S., outbound shipments rose 5.9 percent in March from a year earlier, exceeding the median estimate in a Bloomberg News survey for a 0.2 percent gain. The deficit was 82.6 billion yen ($1 billion), less than the median forecast for a 223.2 billion yen shortfall. Comparisons are distorted by the earthquake in March 2011.
In the U.S., sales of previously owned homes probably increased in March as a drop in mortgage rates propelled demand to its strongest quarter in almost two years.
Purchases climbed 0.7 percent to a 4.62 million annual rate from 4.59 million in February, according to the median estimate of 72 economists in a Bloomberg News survey. Sales in the first three months of the year would average 4.61 million at an annual pace, the best since April through June 2010. Jobless claims declined last week, other data may show.
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