German exports posted their biggest fall in half a year in October, pushing the trade surplus sharply lower in a sign that Europe's largest economy weakened entering the fourth quarter of 2011 as the debt crisis hammered key euro zone export markets.
Exports fell by 3.6 per cent from a month earlier, their largest decline since April, compared with the poll forecast for a fall of 1 per cent. Imports also shrank by their biggest amount in six months, dipping 1.0 per cent compared with an expected 0.5 per cent rise.
Data from the Federal Statistics Office today showed the seasonally-adjusted trade surplus falling to €12.6 billion from a revised €15.1 billion in the previous month. That compared with a consensus forecast for 14.3 billion in a Reuters poll of economists.
"We are seeing the beginning of a strong hit to German exports. It is telling that the exports fell by more than the imports. Domestic demand is stronger than that from abroad. It's the euro crisis," said Berenberg Bank's Holger Schmieding.
"If our neighbours aren't doing well, Germany can't remain an island of tranquility," the economist said.
The unadjusted data showed exports to euro zone countries dipping 0.4 per cent in October compared to the previous year, a much weaker performance than to countries outside the currency region.
Exports to non-euro EU countries rose 3.1 per cent on an annual basis, while those to countries outside the EU pushed up by 8.3 per cent.
Many economists see Germany teetering on the brink of recession due to the euro zone debt crisis, which is depressing confidence and starting to spill over into the real economy.
While the country should still see economic expansion of 3 per cent this year after a strong start to 2011, the government has nearly halved its forecast for 2012 growth to 1 per cent. Berlin is now relying on domestic demand to shore up the economy.
Data has given a mixed picture of German economic activity and some cause for optimism. According to the latest Ifo index business sentiment rose unexpectedly in November for the first time in nearly half a year. Consumers have also shown themselves to be surprisingly resilient, deciding to fork out on durable goods rather than leave their money in the bank at paltry interest rates.
German industrial output beat expectations to rise 0.8 per cent on the month in October, bouncing back after a steep fall in September, and orders data was also much stronger than expected.
However, according to recent Purchase Managers' Index (PMI) data for November, the Germany manufacturing sector suffered its sharpest fall in activity since mid-2009.
Reuters
