BERLIN (MNI) – German tax revenue improved markedly in April but
was distorted to the upside by significantly lower transfers to the EU,
the Finance Ministry said in its latest monthly report released
Thursday.

Federal tax revenue in April rose a strong 8.5% y/y after
contracting 0.2% y/y in March. In the first four months of the year,
federal tax revenue is down 3.4% y/y. For the full year of 2010, the
government’s tax estimate commission forecast earlier this month a
decline of 5.1%.

Total public tax revenue (ex-local taxes) increased by 4.4% y/y in
April after -3.7% y/y in March. In the January-April period, total tax
revenue (ex-local) was down 2.6% y/y, in line with the full-year
forecast of -2.6%.

Federal revenues (tax intake plus other income) in January-April
was down 5.5% y/y compared to a full-year projection in the 2010 budget
of -7.3%. Federal expenditures in the same period were up 5.3% y/y,
undershooting markedly the full-year budget forecast of +9.3%.

In the economic section of its monthly report, the ministry was
quite upbeat about the near-term outlook for the domestic economy. It
noted that the reaction to the production drop caused by the harsh
winter weather already began at the end of the first quarter.

In March the “hard” economic data improved markedly, the ministry
observed. “Thus, economic activity should further pick up in the coming
months,” it predicted. The export sector will remain the growth
engine
for the moment but should increasingly stimulate domestic demand, it
said.

Exports are seen remaining vibrant also over the coming months.
“Due to the impulses from foreign trade, equipment investments should
also gain in steam,” the ministry said.

Industrial production is expected to continue its upward trend over
the next months. The construction sector is also seen staying on a
recovery path in 2Q.

However, current economic data don’t point to a marked pick-up of
private consumption at the moment, the report stated. Still, the ongoing
recovery and relatively moderate unemployment rates should boost private
consumption somewhat in the further course of the year, the ministry
reckoned.

Turning to price developments, the ministry said it expected
inflation to remain moderate for the time-being. However, on the heels
of the continuing global economic recovery, oil prices as well as
non-energy prices might rise, it said. “A falling euro exchange rate
will likely add to this price pressure,” it remarked.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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