Export malaise hits Germany as EU economic heavyweights struggle

German exports slowed in the first half of the year, adding to European economic jitters. (Reuters)
Updated 10 August 2019

Export malaise hits Germany as EU economic heavyweights struggle

  • German industrial output fell 1.5 percent in June from May

BERLIN: Momentum in German exports slowed in the first half of 2019 and abruptly reversed in June, adding to signs of broad-based weakness in an economy increasingly relying on domestic demand to eke out even meager growth.

A global growth slowdown accompanied by tariff disputes and uncertainty over Brexit has affected growth across western Europe, but Germany's traditionally export-reliant economy  has been particularly vulnerable.

Those headwinds have been offset by stimulus at home, where record-high employment, inflation-busting wage hikes and low borrowing costs have driven a consumer and construction boom.

However, that may not prevent German GDP — for which preliminary data is due on Wednesday — from joining Britain in having contracted in the three months to June.

Reflecting the foreign/domestic split, Germany's trade surplus narrowed to €109.9 billion ($123 billion) from €122.4 billion in the half year to June as imports rose 3 percent and export growth slowed to 0.5 percentfrom the previous six months, Federal Statistics Office data showed.

In June, exports fell 0.1 percent from May while year on year they plunged 8 percent to mark their steepest rate of annual decline in nearly three years — and the DIHK business association said it expected exports to nearly stagnate in 2019 as a whole.

“Rising protectionism and a noticeably weakening global economy are burdening Germany’s export-reliant economy,” DIHK economist Volker Treier said.

“The US trade dispute with China and the tenacious struggle for Brexit are unsettling investors worldwide and clouding the prospects for German producers.”

June also marked a potential watershed for industrial output in both Germany and in Europe's third largest economy, France.

German output fell 1.5 percent from May, data showed on Wednesday, while corresponding figures from France on Friday showed a drop of 2.3 percent. Both readings were weaker than expected.

Both countries’ export sectors,  including their high-profile car industries, have been hit by flagging demand from China as its trade dispute with the US has deepened.

“We no longer expect the Chinese government to significantly boost its stimulus package,” Commerzbank economist Joerg Kraemer said. “Instead, it accepts the growth loss that comes with the trade war.”

Citing weaker demand from emerging markets and from China in particular, the bank’s economic research team cut its 2020 growth forecast for the German economy to 0.8 percent from 1.3 percent previously.


Huawei given 90 days to buy from US suppliers

Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Monday, Aug. 19, 2019. (AP)
Updated 20 August 2019

Huawei given 90 days to buy from US suppliers

  • Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers

WASHINGTON: US Commerce Secretary Wilbur Ross said Monday the US government will extend a reprieve given to Huawei Technologies that permits the Chinese firm to buy supplies from US companies so that it can service existing customers, even as nearly 50 of its units were being added to a US economic blacklist.
The “temporary general license,” due to expire on Monday, will be extended for Huawei for 90 days, he told Fox Business Network Monday, confirming an expected decision first reported Friday by Reuters. He also said he was adding 46 Huawei affiliates to the Entity List, raising the total number to more than 100 Huawei entities that are covered by the restrictions.
Ross said the extension was to aid US customers, many of which operate networks in rural America.
“We’re giving them a little more time to wean themselves off,” Ross said.
Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers.
The extension, through Nov. 19, renews an agreement continuing the Chinese company’s ability to maintain existing telecommunications networks and provide software updates to Huawei handsets.
Asked what will happen in November to US companies, Ross said: “Everybody has had plenty of notice of it, there have been plenty of discussions with the president.”
When the Commerce Department blocked Huawei from buying US goods earlier this year, it was seen as a major escalation in the Sino-US trade war.
The US government blacklisted Huawei, alleging the Chinese company is involved in activities contrary to national security or foreign policy interests.

BACKGROUND

The US blacklisted Huawei, alleging the Chinese company was involved in activities contrary to national security or foreign policy interests.

As an example, the blacklisting order cited a pending federal criminal case concerning allegations Huawei violated US sanctions against Iran. Huawei has pleaded not guilty in the case.

The order noted that the indictment also accused Huawei of “deceptive and obstructive acts.”
At the same time the US says Huawei’s smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied.
Huawei, the world’s largest telecommunications equipment maker, is still prohibited from buying American parts and components to manufacture new products without additional special licenses.
Many Huawei suppliers have requested the special licenses to sell to the firm. Ross told reporters late last month he had received more than 50 applications, and that he expected to receive more. He said on Monday that there were no “specific licenses being granted for anything.”