(Adds analyst, Bundesbank forecast)
By Michael Nienaber
FRANKFURT, June 9 (Reuters) - German exports rose more strongly than expected in April while imports posted an even bigger increase, narrowing the trade surplus of Europe’s biggest economy.
The trade figures, released by the Federal Statistics Office on Friday, were another sign that Germany’s robust economic upswing is likely to continue following Thursday’s news that industrial production rose by more than expected in April.
The shrinking trade surplus is also welcome news for Chancellor Angela Merkel, who is seeking a fourth term in September national elections amid criticism from U.S. President Donald Trump, who has called Germany’s trade and spending policies “very bad” for America.
Seasonally adjusted exports were up 0.9 percent on the month while imports jumped 1.2 percent, data from the Federal Statistics Office showed. A Reuters poll had pointed to exports rising 0.3 percent and imports falling 1.0 percent.
Domestic demand has replaced exports as the main growth driver in Germany as consumers and the state are benefiting from falling unemployment, rising tax revenues and record-low borrowing costs enabled by the European Central Bank’s loose monetary policy.
The seasonally adjusted trade surplus edged down to 19.8 billion euros from a revised 19.9 billion euros in March. The April reading was below the Reuters consensus forecast of 20.3 billion euros.
Germany’s wider current account surplus, which measures the flow of goods, services and investments, plunged to 15.1 billion euros after a revised 31.1 billion euros in March, the data showed.
BayernLB economist Johannes Mayr said the international debate about trade policies and protectionism so far had not put the brakes on German export growth. “We continue to expect net trade to contribute to overall growth,” Mayr added.
The German economy grew by 1.9 percent in 2016, the strongest rate in half a decade, helped by soaring private consumption, higher state spending and increased construction.
In the first quarter of 2017, the economy picked up further speed as exports also helped to drive growth, pushing up Germany’s quarterly growth rate to 0.6 percent from 0.4 percent in the fourth quarter of 2016.
In another positive sign, the German central bank on Friday increased its growth forecasts for the German economy. The Bundesbank now expects adjusted GDP growth of 1.9 percent in 2017, 1.7 percent in 2018 and 1.6 percent in 2019.
All three figures were 0.1 percentage points higher compared with the previous forecasts from December.
Despite the better growth prospects, the Bundesbank expects German inflation to remain well below the ECB’s target of just under 2 percent for another year.
It cut its inflation forecasts for 2018 and 2019 to 1.4 percent and 1.8 percent respectively, while nudging up its projection for this year to 1.5 percent.
Its previous estimates put price growth at 1.4 percent this year, 1.7 percent the next and 1.9 percent in 2019.
Coming a day after the ECB trimmed its inflation estimates for the euro zone as a whole, the downgraded Bundesbank projections may weaken its hand in calling for an imminent scaling down of the ECB’s monetary stimulus. (Additional reporting by Francesco Canepa; Editing by Andrea Shalal and Gareth Jones)