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In the competition between world's top economies, Germany continues to carry Europe and the U.S. starts to roar back to life

US factory worker

Germany's current economic upswing is lasting longer than expected. Although economists warned last year that German industrial output would drop sharply because of weaker demand from abroad, it hasn't happened yet. In November, industrial output increased significantly – by more than five percent over the previous month.

Even though a few major contracts are distorting this picture, German export-driven expansion seems to be continuing. The demand for German cars and machinery has increased sharply in recent months, and orders from abroad increased by 8.2 percent last November. The order books of major industrial firms are full enough for Carnsten Brzeski, an expert in German markets at ING, to speculate that "the influx of new orders in the coming months might even lead to bottlenecks in production."

The entire Euro zone is looking forward to a good economic year and the region's economic mood improved more than expected in December. In the past month, the European Commission's economic climate index has reached its highest level since late 2007. This increase can be attributed to the balances of industrial enterprises in Germany, which are expected to increase in the coming months.

The economic mood has improved most significantly in Germany, France and Italy. However, the peripheral economies of Spain and Greece continue to deteriorate, and European consumers remain more skeptical than businesses, with the consumer confidence index dropping since November.

On the other side of the Atlantic, the economy appears to be developing more quickly than expected. In the past few weeks, a rolling series of positive indicators has surprised economic experts. The profits of U.S. companies are on a steady upswing, with many beginning to invest again. Private consumption increased in the fourth quarter, leading to surprisingly strong Christmas sales for U.S. retailers. As a result, many economists want to revise their growth forecasts to put the U.S. on top.

Commerzbank has shared its revised US forecast with Die Welt. Previously, the bank's experts predicted US growth of three percent for 2011. In light of the recent positive news, analysts now expect the American economy to grow by four percent this year. This prediction differs from the general consensus, as the majority of economists are expecting the U.S. economy to increase by just below three percent in 2011. "The U.S. economy's hand brake has been loosened, and the wagon is rolling," says Joerg Kraemer, chief economist at Commerzbank. "Even the labor market seems to be picking up. The number of new applications for unemployment benefits is already dropping."

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