Trade boost may not save German economy from Q2 contraction

Friday 08 August 2014 17.23
German imports jump 4.5% in June, new figures show
German imports jump 4.5% in June, new figures show

German exports and imports rebounded in June, suggesting the West's standoff with Russia over Ukraine is not seriously hurting Europe's largest economy.  

New data from the Federal Statistics Office showed seasonally adjusted imports rose by 4.5% in June, their strongest monthly increase since November 2010 and a bounce back from a sharp drop in May. 

Exports rose by 0.9%, nearly double the rate expected by economists in a Reuters poll. 

For the second quarter as a whole, the figures showed exports increasing marginally compared to the first three months of the year and imports falling. 

But even with a marginal boost from trade, some economists see a chance of a contraction in gross domestic product when data for the second quarter is released next Thursday.

German trade groups are also warning of further trouble from the escalating showdown with Russia.

According to a Reuters poll, the preliminary GDP data is expected to show the economy stagnated in the second quarter after powering ahead in early 2014 due to mild weather. 

But a growing chorus of economists is now predicting that the economy could actually contract for the first time since late 2012. 

Other data this week has disappointed, with industrial orders suffering their sharpest fall in nearly three years due to weak euro zone demand and below-average bulk orders, and output undershooting forecasts with only a modest rise. 

Russia banned many Western food imports yesterday in response to economic sanctions unveiled by the US and Europe over Moscow's support for rebels in eastern Ukraine. 

Russian exports, which make up about 3.3% of total German exports, fell by around 15% in the first five months of 2014 compared with the same period last year. 

About 10% of exporting firms in Germany ship their goods to Russia and some of them, including defence firm Rheinmetall and generic drugmaker Stada warned this week about a hit to business from the standoff between the West and Moscow. 

Some German firms have complained of weak demand in other overseas regions too. Beiersdorf, the makers of Nivea skin cream, said that growth in emerging markets was stuttering.

Truck maker MAN has pointed to falling orders in major South American markets. 

A breakdown of unadjusted data showed exports to the euro zone climbed by 0.3% in June compared to the same period last year, while exports to countries outside of Europe were down 0.9%.

Germany's trade surplus narrowed to €16.2 billion from €18.8 billion the previous month. The consensus forecast in a Reuters poll had been for it to shrink to €17.5 billion.