German exports surged at their fastest rate in nearly 18 years in March, surpassing even the most optimistic forecast as Europe’s largest economy shifted up a gear after stumbling over an unusually cold winter.

Analysts said foreign demand was powering Germany’s recovery and could have pushed first quarter gross domestic product into positive territory.

They cautioned however that the euro zone crisis and pressure to consolidate budgets could put the brakes on exports in the months ahead.

“The German economy is getting a significant boost from exports,” said Klaus Schruefer from SEB. “Wednesday’s GDP figures could end up being better than expected.”

Economists have previously forecast German GDP figures, due for release on Wednesday, to show the economy stagnating in the first three months of 2010.

“But we need to remain a bit cautious,” added Schruefer. “We export a lot to other euro zone nations. The pressure to consolidate public finances could therefore put a brake on Germany’s future exports.”

Adjusted for seasonal swings, German exports rose 10.7 percent month-on-month to 79.0 billion euros ($106 billion), the largest jump since July 1992, according to Bundesbank data.

Exports had been expected to rise by 2.6 percent, with 4.1 percent the highest forecast. Imports also gained more than expected, up 11.0 percent to 65.7 billion euros versus a forecast for a 0.3 percent rise, the Federal Statistics Office said. This yielded a trade surplus with the rest of the world of 13.3 billion euros in March, up from 12.1 billion euros in February. A reading of 14.0 billion euros had been forecast.

“The recovery in German trade has significantly gained steam, but there are new issues casting a shadow over it,” said Anton Boerner, the head of the BGA exporters’ group.

“Price stability is decisive for German trade…the Greek debt crisis is therefore making us very worried.” Spring Correction

Foreign trade is expected to play a major role in the recovery in Germany, which was the world’s biggest exporter of goods from 2003 to 2008, before being overtaken by China.

“The German economy has picked up speed, particularly the manufacturing sector,” said Juergen Michels at Citigroup.

Germany exited its deepest post-war recession in the second quarter of last year but the recovery stalled through the winter when harsh weather disrupted business activity.

Recent economic indicators have pointed to the recovery picking up again, with data last week showing industrial output and orders surging in March.

In addition, German business morale surged in April to its highest level in nearly two years. However, economists said the March rise in exports was partly a correction from last year’s drastic figures and the difficult winter months. Exports posted their biggest drop in a year in January, shocking analysts.

“This massive increase is also partly down to the fact that we’re seeing a correction to the impact of the weather. At the start of the year, the harsh winter held things back,” said Michels at Citigroup.

“Things aren’t going to continue at this pace. But the increase in orders suggest that the export motor will be turning over at a pretty brisk pace in the next few months.” (Reuters)