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News : EU Economy Last Updated: Jan 20, 2011 - 2:27 PM

German government revises growth forecast for 2011; Food prices on the rise
By Finfacts Team
Jan 20, 2011 - 2:24 PM

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The German government has revised its growth forecast  for the national economy in 2011, raising it half a% from its prediction in October. In 2010, the German economy grew at the fastest pace since reunification. Also today, it was reported that food prices increased substantially in 2010.

The German government has raised its growth forecast for the national economy this year to 2.3%, an upward revision from the 1.8% it predicted in October.

"2011 will be a good year, too," said Rainer Brüderle, Federal Minister of Economics and Technology, announced in Berlin.

Brüderle said that while growth will continue at high rates in the developing world, the pace of recovery in developed countries is likely to slow this year. Growth will be supported by increasing domestic demand, which the government sees rising by 2.0%, and private consumption, forecast to rise 1.6%

"Private consumption will therefore be driving growth," Brüderle said.

If the forecast holds, it would be lower compared to 2010, when the economy expanded by 3.6% in 2010, the fastest rate since reunification in 1990.

The forecast for 2011 would also indicate the German economy had returned to its pre-recession levels.

The government says it also expects that unemployment will drop to 7% compared to 7.7% last year with unemployment falling below 3 million  - - the lowest since the early 1990s.

Today, the federal statistics office, Destatis, reported that the index of producer prices for industrial products (domestic sales) for Germany rose by 5.3% in December 2010 from the corresponding month of the preceding year. In November and October 2010, the annual rates of change were +4.4% and +4.3%, respectively.

Compared with the preceding month, the index rose by 0.7% in December 2010 (+0.2% in November 2010).

On an annual average in 2010 the index of producer prices for industrial products rose by 1.6% from the previous year. A year before the index had fallen by 4.2%.

Also today, Destatis reported that food prices increased substantially on a year earlier. The news coincides with the 2011 International Green Week Berlin, that food prices in December 2010 were up 3.6% on December 2009. The strongest increase in food prices was thus observed at the end of the year.

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