Germany's trade surplus narrowed in November as imports gained more than expected, a sign domestic demand is growing in strength although other data showed retail sales and industrial output dipped the same month.

Berlin's struggling euro zone partners are hoping that a pick up in how much Germans spend will bolster their economies. The data showed the country's imports rose 4.1 percent, yielding a trade surplus of 11.8 billion euros.

Separate preliminary data showed November retail sales and industrial output fell, but analysts played down those numbers.

Industry output fell by 0.7 percent on the month in seasonally adjusted terms, dragged down by manufacturing and construction, below the median forecast for a 0.2 percent decrease in a Reuters poll of 17 economists.

"It's a little disappointing but we had a strong rise in the previous month, so the drop is not worrying," said Juergen Michels of Citigroup on the output data.

"The early onset of winter could have played a role here. The economy is robust and it will stay that way this year too."

More forward-looking data showed manufacturing orders grew at their fastest rate in 10 months in November, thanks to strong demand outside the euro zone.

Exports, the traditional backbone of the German economy, rose 0.5 percent on the month adjusted for seasonal swings, less than the 0.8 percent growth forecast in a Reuters poll.

In unadjusted terms, they totalled 88.0 billion euros in November, more than in any month since October 2008, adding to mounting evidence the economy remains in full swing.

The strong rise in imports marks a sharp turnaround from Germany's usual reliance on exports and is in line with expectations that domestic demand is becoming more key.

The Ifo institute has said that more than three quarters of Germany's growth would come from the domestic economy in 2011, a sharp turnaround from its usual reliance on exports. Private consumption would rise 1.4 percent and investment in machinery and equipment 8.7 percent, it said.

But the head of the country's BGA trade association told Reuters the import jump was not due to stronger private consumption and that imports would mainly rise due to rising raw material costs, not consumer spending.

Solid Growth
Germany's economy is expected to have grown by 3.6 percent in 2010, according to a Reuters survey of 22 economists, emerging quickly from its deepest post-war recession the year before that and leaving behind peers in the euro zone still in, or on the brink of, recession.

German 2010 gross domestic product growth data are due on January 12.

"Rising imports are a sign of domestic demand picking up. That is our contribution to the growth of euro zone countries, for many of which we are the most important trade partner," said Holger Sandte at West LB.

"Exports, too, will go well, even if growth will not be as strong as in 2010," he added.

German exports to the European Union still make up the bulk of exports but trade with countries outside the bloc is increasing. In November, more than 40 percent of total exports went to countries outside the European Union and about 37 percent of imports came from those countries.

German carmakers Volkswagen and Daimler will sign deals totalling $5 billion at a meeting with China's Vice Premier Li Keqiang on Friday, German government sources told Reuters.

Volkswagen's premium brand Audi aims to sell 1 million cars in China over the next three years, it said last month.

Retail sales fell 2.4 percent on the month when adjusted for inflation. Over the year, however, growth remained intact and analysts stressed the numbers are volatile and cover just three-quarters of retail sales. (Reuters)