German exports plunge by largest amount in five-and-a-half years
The Federal Statistics Office said late-falling summer vacations in some German states had contributed to the fall in both exports and imports, but the figures still painted a gloomy picture for Germany following steep drops in industrial orders and output data earlier in the week.
They are likely to intensify a debate over whether Chancellor Angela Merkel’s government should be ratcheting up public investment in infrastructure instead of prioritizing deficit reduction.
“We are no longer growing,” said Volker Treier, chief economist at the German Chambers of Commerce and Industry (DIHK). “We have had too little investment in Germany for years now.”
Carsten Brzeski, an economist at ING, added: “No more Sommermaerchen (summer fairy tale) but rather a German summer horror story.”
The data showed seasonally adjusted imports falling 1.3 percent on the month, at odds with expectations in a Reuters poll for an increase of 1.0 percent. Exports had been expected to fall by a more modest 4.0 percent after rising 4.8 percent in July.
The trade surplus stood at 17.5 billion euros, down from 22.2 billion euros in July and less than a forecast 18.5 billion euros.
Germany’s economy had a strong start to the year but shrank by 0.2 percent in the second quarter. Evidence is mounting that it barely grew in the third quarter and some economists are forecasting another contraction in that period, which would amount to a technical recession.
On Tuesday, the IMF slashed its 2014 growth forecast for Germany to 1.4 percent from 1.9 percent, and its 2015 forecast to 1.5 percent from 1.7. Later on Thursday a group of leading economic institutes is poised to sharply cut its forecasts for German growth.
The poor data comes at a time when pressure is mounting for Germany to use its healthy budget situation to boost public spending and spur growth in Europe.
However for now, the top economic priority of Merkel’s government is to deliver on its promise of a “schwarze Null” – a federal budget that is in the black, or fully balanced – in 2015.
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