German trade surplus narrows


German exports unexpectedly edged up in July but imports rose by more, slightly narrowing the trade surplus, data showed today, in a sign that Europe's largest economy remains relatively resilient to the euro zone crisis.

Exports inched up a seasonally adjusted 0.5 per cent and imports gained 0.9 per cent, data from the Federal Statistics Office showed. The consensus forecasts in a Reuters poll of economists were for exports to drop 0.5 per cent and imports to fall 0.3 per cent.

The seasonally adjusted trade surplus narrowed to €16.1 billion from a revised €16.3 billion in June. The consensus forecast had been for it to narrow to €15.5 billion.

"The start to the third quarter was successful, particularly given positive industry orders," said Andreas Rees of Unicredit. "It does not look like activity in the industrial sector will dramatically slide."

"However it is only a question of time until the bad values in the Ifo and purchasing manager indices translates into hard data."

Recent data has painted a mixed picture of the German economy, which has remained fairly robust throughout the euro zone's three-year debt and financial crisis but is starting to show signs of weakness.

Economic growth slowed to 0.3 per cent in the second quarter and many economists predict a contraction for the third and possibly the fourth quarters.

Official figures released yesterday showed German industry orders rose in July and the VDMA engineering trade body raised its forecast for full-year output to 2 per cent growth thanks to stronger-than-expected production in the first half.

But the VDMA said production would be more sluggish in the second half, and a key survey by the think tank Ifo last week showed business sentiment dropped for a fourth month in a row in August to its lowest level since March 2010.

Purchasing managers' surveys showed Germany's services sector shrank at its fastest rate in more than three years in August while the manufacturing sector contracted for a sixth consecutive month.

The trade figures provide positive news to struggling euro zone countries that are looking to the region's dominant economy to buy more of their goods and offset the impact of the region's debt crisis and their own austerity measures.

A breakdown of data showed that imports from the euro zone rose 6.7 per cent on the year in July, compared to a more subdued 1.9 per cent overall year-on-year rise.

Exports to the euro zone also rose, up 3.2 per cent on the year, although they jumped 15.9 per cent to countries beyond Europe, suggesting there is still strong demand for German products.

However, German companies are more cautious about the outlook. Carmaker Volkswagen has cut its expectations for full-year sales, spooked by the stubbornly weak European economy, German daily Handelsblatt reported today.


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