German Exports Fall More Than Expected

Germany’s exports declined more than expected in August highlighting the risk of the economy slipping into a recession in the second half of the year.

Exports decreased 1.2 percent on a monthly basis in August, slower than the 1.9 percent drop in July, Destatis reported Thursday. But the fall was bigger than economists’ forecast of 0.4 percent decrease.

At the same time, imports posted an unexpected fall of 0.4 percent, after a 1.3 percent slide in July. Imports were expected to climb 0.5 percent.

As a result, the trade surplus fell to a seasonally adjusted EUR 16.6 billion from EUR 17.7 billion in July. Nonetheless, it remained above the forecast of EUR 15.0 billion.

On a yearly comparison, exports declined at a faster pace of 5.8 percent after a 1.6 percent drop in July. The annual fall in imports worsened to 16.7 percent from 12.4 percent in the prior month.

As the decline in imports far exceeded the fall in exports, the trade balance registered a surplus of EUR 14.4 billion, which was well above EUR 0.4 billion surplus posted in the same period last year.

Most German exports went to the United States. But shipments to the U.S. fell 1.3 percent on month, while exports to China grew 1.2 percent. Exports to the UK were down 4.2 percent.

Imports from China decreased 2.0 percent from the previous month and those from the US slid 3.1 percent. Imports from the UK also decreased, but more modestly, by 0.9 percent.

Trade is no longer the strong resilient growth driver of the German economy but rather a drag, ING economist Carsten Brzeski said.

The decline in retail sales as well as disappointing exports data added to the risk of the German economy sliding back into a recession in the third quarter, ING said.

The cooling global demand is worsening the structural issues and the weakening of the euro since the summer is still too small to have any significant impact on exports, the ING economist added.

In September, the Bundesbank said the German economy is set to shrink slightly in the third quarter as private consumption is unlikely to contribute positively.

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