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Record German trade surplus points to strong third quarter

Germany posted a record trade surplus of 22.2 billion euros in July, suggesting Europe's largest economy could bounce back strongly in the third quarter after suffering a surprise contraction in the second.

Seasonally-adjusted data from the Federal Statistics Office showed exports surged 4.7 percent to 98.2 billion euros, the most goods and services Germany has ever sent abroad in a single month. It was the sharpest rise in exports since May 2012, easily outstripping expectations for a modest 0.5 percent increase.

Coming on the heels of July data showing industrial output and orders jumping, the trade figures suggest the German economy will be able to skirt a technical recession in the third quarter after shrinking by 0.2 percent in the April to June period.

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"It looks like demand from U.S. and U.K. is more than offsetting any weakness from German exports to Russia so these fears that German exports would go down the drain were clearly exaggerated," said Carsten Brzeski, senior economist at ING.

He expects the German economy to grow by around 0.3 percent in the third quarter.

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The German economy shrank by 0.2 percent in the second quarter due to slow trade and weak investment, leading some economists to warn of a risk that Germany will fall into a technical recession in the third quarter.

Exports - the traditional backbone of Germany's economy - struggled last year and fell in three of the first seven months this year, weighing on overall growth.

Exports to Russia plunged by 15.5 percent in the first half of 2014 amid a standoff between the West and Moscow over Ukraine.

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A breakdown of unadjusted data showed exports to the euro zone climbed by 6.2 percent in July compared to the same period last year, while exports to countries outside of Europe were up 7.2 percent.

Imports fell by 1.8 percent. The consensus forecast had been for them to fall by 0.1 percent.

- By Reuters