World Economy

German Exports Slump, Add to Growth Concerns

German Exports Slump, Add to Growth ConcernsGerman Exports Slump, Add to Growth Concerns

German exports plunged unexpectedly in July, posting their steepest drop in nearly a year, while imports also edged down, suggesting Europe’s biggest economy started the third quarter on a weak footing.

“The second half of the year begins with a crash landing of foreign trade,” BGA trade association head Anton Boerner said, adding that an unusual high number of risks and crises around the globe was increasing uncertainty and hampering investments, Reuters reported.

The poor performance narrowed the seasonally adjusted trade surplus to €19.4 billion ($21.9 billion), data from the Federal Statistics Office showed, with a particularly large decline in exports to countries outside the EU like China.

This marked the fourth month in a row of a shrinking surplus, something not seen since 1992, and indicated that Germany’s shift towards a more domestically driven economy could lead to smaller trade surpluses in the medium term.

Still, Finance Minister Wolfgang Schaeuble rejected a recent suggestion by European Central Bank President Mario Draghi that Germany should do more to boost domestic demand, increase imports and reduce its trade surplus.

The feeble trade figures followed economic data this week that painted a gloomy picture for German manufacturing, with industrial orders barely rising and output falling the most in nearly two years. “The month of July was clearly not a good month for Germany,” ING economist Carsten Brzeski said, adding that the surprisingly weak trade figures exacerbated growth concerns.

 Fiscal Stimulus

“A further cooling of the economy in the months ahead should give more support to just-started discussions about fiscal stimulus,” Brzeski said.

Seasonally adjusted exports fell 2.6% on the month, the data showed. This undershot the Reuters consensus forecast of a 0.25% increase. Imports edged down 0.7% which was also weaker than the predicted 0.8% rise.

Commerzbank economist Ralph Solveen said the steep drop in exports partly reflected special factors such as more holidays falling in July.

“However, exports certainly won’t be the driver of the German economy in the coming months,” Solveen said. “There is the sluggish global economy and the effects from the weaker euro are also fading.”

Meanwhile, a breakdown of unadjusted trade figures showed that demand for German goods from countries outside the EU dropped the most, with exports to so-called third countries, which includes the United States, Japan and China, plunging by 13.8%.

German exports to EU countries outside the eurozone, which includes Britain, dropped by 8.8%.