​There were positive numbers from elsewhere in Europe, with French imports rebounding and Greece revising down the scale of its economic contraction in the second quarter. But much of the rest of the euro zone still looks far shakier than Germany, where an improvement in domestic demand is at the heart of hopes for an economic recovery over the next year. German trade and output data released on Friday, combined with figures a day earlier showing a sharp drop in industrial orders, painted a disappointing picture for July, although a less volatile two-month comparison still points to a rebound. "There's no momentum, so the exports are pausing at a high level," said Anton Boerner, head of Germany's BGA trade association. "However, a slight increase on the imports side is certainly thanks to strong domestic demand." Industrial output fell more than expected by 1.7 percent on the month in July, the deepest drop since April 2012, but on a two-month comparison they were still up 0.5 percent. June had been particularly strong because workers took time off in May when there was a high number of public holidays. A bastion of strength in the early years of the euro zone crisis, the German economy narrowly avoided a recession at the start of the year before returning to 0.7 percent growth in the second quarter. With exports, traditionally the backbone of the German economy, subdued, domestic demand has been the driver so far this year and that has had a positive effect on its neighbors. French consumer confidence improved slightly more than expected in August and imports rebounded in July, signs that domestic demand in the euro zone's second-biggest economy is also perking up. Even Greece, where the euro zone debt crisis first erupted, offered a glimmer of hope, with data showing on Friday economic output shrank by 3.8 percent percent year on year, less than a previous flash estimate. Exports Disappoints Seasonally-adjusted exports dropped by 1.1 percent on the month, data from the Federal Statistics Office showed on Friday, missing the consensus forecast in a Reuters poll for a 0.8 percent increase. Imports, forecast to gain 0.9 percent, rose by a less-than-expected 0.5 percent but an originally reported 0.8 percent fall in June was revised to a deeper 1.0 percent drop. "It's a disappointment, but the data have fluctuated a lot in recent months," said Stefan Schilbe at HSBC Trinkaus. "But we can be hopeful that the picture will change for the better in coming months. Leading indicators in industrial states - from the United States to Britain and the euro zone states - are pointing upwards." The drop in exports was driven by a 0.7 percent decrease in sales to the euro zone, which buys roughly a third of German goods and services, and a 1.0 percent fall in sales to non-EU states, likely due to weakness in emerging nations and the United States. The BGA trade body sees exporting growing 3 percent this year, implying a strong increase after July as exports between January and July were down 0.5 percent from a year earlier. (Reuters)