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Germany sends mixed signals as production down, exports up in April; Bundesbank raises outlook

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BERLIN - German industrial production edged up by a smaller-than-expected 0.2 per cent in April, but the country's trade surplus widened as exports rebounded and the country's central bank on Friday raised its growth forecast for Europe's biggest economy.

Germany's economy grew by a robust 0.8 per cent in the first quarter compared with the previous three-month period. However, recent data have sent mixed signals and Friday's production figure underlined expectations of slower second-quarter growth.

The figure was below economists' expectations of a rise by 0.3 per cent or more compared with the previous month. In March, production dropped 0.6 per cent — revised downward from the original reading of a fall of 0.5 per cent.

The economy is fundamentally strong but two consecutive disappointing production figures suggest that the Ukraine crisis and China's slowdown "could still have a stronger impact on the real economy than confidence indicators made us believe and that the eurozone recovery is not (yet) strong enough to have a positive impact on the German industry," ING economist Carsten Brzeski said.

Germany already reported a much stronger-than-expected 3.1 per cent rise in industrial orders in April. On Friday, official data showed that German exports rose 3 per cent on the month after declining for two months, while imports edged up 0.1 per cent. That pushed Germany's trade surplus up to 17.7 billion euros ($24.1 billion) from 14.8 billion euros in March.

Germany's central bank, the Bundesbank, forecast that gross domestic product will grow by 1.9 per cent this year, 2 per cent next year and 1.8 per cent in 2016. In December, it forecast 1.7 per cent growth this year. Last year, the economy grew by only 0.4 per cent.

Bundesbank president Jens Weidmann said stronger domestic demand, a recovering eurozone and industrialized countries' improving economies point to "a solid growth course" but cautioned that "increased geopolitical tensions" or a resurgence of the eurozone crisis could yet dampen growth.

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