German exports dropped sharply in January due to weather effects, ending increases in four consecutive months, data released by the Federal Statistical Office showed Wednesday.

Overseas sales fell 6.3% month-on-month in January following a revised increase of 3.4% in December. It was the first decline since August and was the fastest since January last year. Economists had forecast a 0.5% rise. On an annual basis, the pace of growth eased to 0.2% from 3.7%.

The latest decline in exports should only be a temporary correction, said Carsten Brzeski, an economist at ING Bank NV. The strong increase in new orders bodes well for the coming months, the economist noted. "The export structure, both in terms of destinations and product specialization, should continue to make the German export sector a beneficiary of the ongoing global recovery," he said.

Tuesday, Bundesbank President Axel Weber said the strengthening global economic recovery, accompanied by stronger demand stimuli, especially from non-Eurozone countries, is good news for German exporters. "Taking the various factors into account," he said, "I firmly believe that the recovery process which began in the third quarter of 2009 is essentially intact and that it will continue despite the slower pace of growth in the final quarter of last year and the first quarter of 2010."

The German economic recovery ground to a halt in the final quarter of 2009. Gross domestic product was flat in the three months through December period after a 0.7% growth in the September quarter. The European Commission sees 1.2% growth this year in the biggest-Eurozone economy.

Last week, official data showed that factory orders rose more than expected in January. Industrial production also rose during the month. Further, survey data from Markit Economics suggested that manufacturing recovery gained momentum in February and new orders rose at the fastest rate for over three years. Given these developments, it is likely that the drop in exports would be temporary.

"The fact that the global economy is growing and companies' export expectations have risen so far suggests that exports will pick up further in the coming months," Commerzbank analyst Simon Junker said. "Despite this setback in exports, we stick with our prediction that the German economy will continue to recover and foreign trade will play a significant part in driving this recovery."

According to the statistical office, German imports grew 6% on a monthly basis, easing the pace of annual decline to 1.4% from December's 6.1% fall.

The foreign trade balance showed a surplus of EUR 8 billion in January versus a surplus of EUR 7.1 billion last year. However, it narrowed from EUR 13.4 billion surplus recorded in December. Meanwhile, economists had forecast an increase to EUR 14.5 billion. Upon calendar and seasonal adjustment, the foreign trade balance recorded a surplus of EUR 8.7 billion in January 2010.

According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments showed a surplus of EUR 3.6 billion in January. It compares with EUR 3.2 billion surplus last year.

Earlier in the day, official data showed that China's exports surged 45.7% year-on-year in February, but dropped an adjusted 2.2% from the previous month suggesting a persistent weakness in foreign demand. China has already dethroned Germany to become the world's largest exporter, with Germany's export revenue of $1.12 trillion in 2009 falling short of the Asian nation's $1.20 trillion revenue for the same period. The spike in exports is likely to renew calls for a stronger yuan from China's trading partners and test the central bank's resolve to keep monetary policy "appropriately loose".

In a separate report, the statistical office revised up February's inflation figure from the preliminary estimate. In January, the consumer price index rose 0.6% year-on-year, faster than the 0.4% increase initially estimated. It follows a 0.8% increase in January. On a monthly basis, the index was up by 0.4% in February, a revision from 0.2% rise reported previously. The harmonized index of consumer prices increased 0.5% year-on-year in February. Compared with January 2010, the index was up 0.4%. Both figures represent a revision from the preliminary estimate of increases of 0.3% and 0.2% respectively.