German export engine powers growth in second quarter

A strong rise in German exports outstripped gains in imports to power growth of 0.4 per cent in Europe’s largest economy in the second quarter, data showed on Tuesday.

The outlook for industrial companies is buoyed by full order books, but investments flagged in the quarter, clouding the picture as concerns over a global economic slowdown intensify.

The figures from Germany's Federal Statistics Office showed Germany's export engine, traditionally its major growth driver, was in rude health at the mid-point of 2015.

Exports rose by 2.2 per cent on the quarter in the April-June period, outperforming a 0.8-per cent increase in imports. This meant that foreign trade added 0.7 percentage points to GDP while domestic demand subtracted 0.3 per centage points.

However, gross capital investment subtracted 0.1 percentage points from GDP and inventories deducted 0.4 per cent as companies ran down stocks.

"Companies are not investing as they really should," said Ulrike Kastens at Sal. Oppenheim.

"The low interest rate is not decisive for them, but rather developments in key markets. Here there are major question marks, as developments in China and other emerging markets show."

Earnings by German companies have been exceeding expectations, though they are concerned about the uncertain global outlook. Germany’s benchmark DAX share index fell 4.7 per cent on Monday following a rout in Chinese markets.

Around half of Germany’s 30 blue-chip companies reported consensus-beating financial results for April-June. More than two thirds nonetheless stuck with their guidance for the year as a whole as political and economic uncertainties remain in focus.

In positive news for the economic outlook, figures released earlier this month showed industrial orders recorded their biggest gain since early 2011 in April-June thanks mainly to strong foreign demand.

However, the mood among analysts and investors in Germany worsened this month due to concerns about the unstable global backdrop.

Reuters