German exports slump 5% amid euro zone strain

Sparking off the drop were a slowdown in China, Germany's third-biggest trade partner, as well as in other emerging markets that have been key destinations for German exports. At left is a worker in a steel factory in the western German city of Duisb
Sparking off the drop were a slowdown in China, Germany's third-biggest trade partner, as well as in other emerging markets that have been key destinations for German exports. At left is a worker in a steel factory in the western German city of Duisburg.PHOTO: REUTERS

Biggest decline since 2009 recession a sign Germany feels pain of weakening global trade

FRANKFURT • German exports have slumped the most since the height of the 2009 recession in a sign that Europe's largest economy is feeling the pain of weakening global trade.

Foreign sales declined 5.2 per cent in August from the previous month, the Federal Statistical Office said yesterday. That is the steepest drop since January 2009 and compares with a median estimate in a Bloomberg survey for a fall of 0.9 per cent. Imports slid 3.1 per cent.

In a further sign of a strain in the euro zone, French business confidence worsened unexpectedly.

Germany is grappling with a slowdown in China, its third-biggest trade partner, and other emerging markets that have been key destinations for its exports.

With factory orders from countries outside the 19-nation euro zone falling over 13 per cent in July and August combined, the focus is shifting to stronger domestic spending fuelled by pent-up investment demand and consumption.

"It's conspicuous that both imports and exports slumped," said Nord/LB economist Jens Kramer in Hanover. "German growth has been supported by private consumption and that doesn't go together with today's numbers. For the moment, I wouldn't over-interpret the data."

Exports are still up 6.6 per cent in the eight months to August, compared with the same period the year before, while imports are 3.5 per cent higher.

While the statistics office did not provide a reason for the export drop, the Economy Ministry has cited the timing of school holidays as the main cause of unexpected declines in factory orders and industrial production in August.

German business may also suffer in the coming months from the fallout over Volkswagen AG's cheating on emission tests. News of that scandal broke last month and is not reflected in this week's reports.

Germany's trade surplus shrank to €15.3 billion (S$24 billion) from €25 billion in July, and the current account surplus narrowed to €12.3 billion from €24.7 billion.

Signs are mounting that prospects for the economy are deteriorating. Germany's leading economic institutes are set to lower their growth forecast for this year to about 1.8 per cent from a previous estimate of 2.1 per cent, Reuters reported on Wednesday.

In France, a gauge of business sentiment fell to 97 last month from 98 in the previous month. Economists predicted an increase to 100, which would have been the highest level in almost two years. French growth stalled in the second quarter.

A counter to Germany's weakening export sector may yet be the gradually rising investment in the euro zone. Economic growth in the region will accelerate to 0.5 per cent this quarter from 0.4 per cent in the previous period, according to updated forecasts by Germany's Ifo institute, France's national statistics office Insee and Italy's statistics agency Istat published on Tuesday.

Any further stimulus by the European Central Bank could also prove a boon if it pushes down the euro, making German products more competitive. In a summary of its Sept 2 to 3 monetary policy meeting, the Frankfurt-based central bank said policymakers have opted to take more time to analyse downside risks for growth and inflation in the euro zone.

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A version of this article appeared in the print edition of The Straits Times on October 09, 2015, with the headline 'German exports slump 5% amid euro zone strain'. Print Edition | Subscribe