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.