Growth worries

Export Boom Can't Last, Say Experts

exports_reuters
Containers are flying out of Germany's ports.
  • Why it matters

    Why it matters

    Germany is one of the world’s top exporting countries and its economy is heavily reliant on foreign trade.

  • Facts

    Facts

    • New government figures show Germany achieved a record foreign trade surplus in 2015.
    • Exports were up 6.4 percent on 2014.
    • The United States has overtaken France as Germany’s biggest customer.
  • Audio

    Audio

  • Pdf

German companies have continued their series of export records in 2015. They delivered goods abroad to the value of €1.2 trillion ($1.35 trillion), 6.4 percent more than in 2014, the German Federal Statistical Office announced on Tuesday.

Despite the euro zone’s unresolved crisis, exports in the common currency area increased by 5.9 percent, which is even stronger than in non-European countries, where the figure was 5.6 percent. The greatest boost in demand came from E.U. countries, such as Great Britain, that don’t use the euro. Exports to these countries rose by 9 percent. The weak euro is likely to have played a part, as it made German goods cheaper in these places.

The export record is all the more notable given that China, Russia and Brazil, three very dynamic sales markets for Germany companies in the past, reduced their buying levels. In the case of Russia, which has been targeted with Western sanctions, the reduction was by a quarter.

For the first time since 1961, the United States replaced France as the most important buyer of German products. Based on the value added, meaning exports less foreign content, the United States has already been Germany’s most important customer for some time.

“We can’t let ourselves be dazzled by these numbers – they represent an embellished picture of reality.”

Anton Börner, Federation of German Wholesale, Foreign Trade and Services

Germany’s foreign trade surplus, which is constantly viewed critically abroad, also reached a new record level in 2015, of €248 billion. According to initial estimates, current account surpluses, along with services and free of charge transfers, increased to €249 billion.

Because imports, with an increase of 4.2 percent, grew at a slower rate than exports in 2015, Germany was not able to live up to its reputation as an economic driving force that pulls other countries along with it.

The Federation of German Wholesale, Foreign Trade and Services assumes that the race to set records will continue in 2016. It sees exports rising by 4.5 percent and imports by 4 percent.

However, the federation views the crises around the world with concern. Its head, Anton Börner, said: “We can’t let ourselves be dazzled by these numbers – they represent an embellished picture of reality.” This is because the European Central Bank is holding the euro rate of exchange artificially low with extremely cheap money. Moreover, there are many trouble spots, such as China being stuck in a “tremendous process of transformation with an uncertain outcome,”

There is compelling evidence for Mr. Börner’s concerns in the latest data. Compared to November, German exports and imports shrank in December, each by 1.6 percent, after calendar and seasonal adjustment. Equally, German industry production value sank compared to the preceding month by 1.2 percent. That was the second monthly decline in a row.

German Trade-01

 

The German economics ministry stated that: “Industry production went through a dry period at the end of the year 2015,” but expressed confidence that the companies will expand their production somewhat at the beginning of the year “given the improvement in incoming orders in the final quarter.”

Economists cooled down their growth forecasts at the end of the year, based on the weak production and export numbers. Commerzbank analyst Ralph Solveen said: “In the fourth quarter, the whole economy may, at best, have only slightly increased.”

Now, along with China and Russia, the German exporters’ largest sales market, the United States, is proving to be a worrisome problem for them, since the financial markets are in crisis and the economy is no longer running smoothly. “The financial turbulence has already caused us to lower the growth forecast by half a percent,” wrote the credit rating agency Moody’s in an analysis distributed on Tuesday. “As long as the markets don’t calm down, there is a great risk the economy’s burden will continue to increase.”

 

Norbert Häring writes about monetary policy, exchange rates, credit markets and the latest scientific developments in economics. To contact the author: haering@handelsblatt.com

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