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German exports at record high, but slowdown seen

Germany sold a record amount of goods abroad in January and the trade surplus widened more, than economists expected, a sign firms in Europe’s biggest economy were coping well with the strong euro at the start of the year.

Economists said net trade would probably have supported overall growth in the Q1, but warned the strength of the single currency and a slowdown in key markets such as the US would dampen foreign demand in coming months. “The loss of dynamism in the United States and western Europe and the ongoing strengthening of the euro means, that only average export growth can be expected this year,” said Matthias Rubisch at Commerzbank in Frankfurt.

Exports rose by 3.8% on the month in January to €85.3 billion ($131 billion) on a seasonally adjusted basis and the surplus was €16.1 billion , exceeding the mid-range forecast of 16.0 billion in a Reuters poll of economists , the Federal Statistics Office said. December’s trade surplus was revised up to €15.8 billion from an originally reported 15.6 billion. Imports rose by 4.2% from December to €69.2 billion, the most since July 1998, the office said. Economists in the Reuters poll had expected a 1.0% gain in exports and imports to be unchanged on the month.

Germany is the world’s largest exporter of goods, selling almost €1 trillion ($1.5 trillion) worth abroad in 2007, and foreign trade has been a key engine of growth. However, the euro’s surge to a record high well above $1.50 will make euro zone goods and services more expensive for customers outside the bloc. Finance ministers from the region last week expressed concern for the bloc’s exporters and said the weakness of the dollar no longer reflected economic reality.

 

PURCHASING POWER

Some leading German industry groups have played down the impact of the strong euro and point to an increase in purchasing power that helps offset surging energy and raw materials costs. Compared with a year earlier, German exports to other European Union countries rose by 7.7% in January and exports to non-EU nations jumped 11.5%, the office said. Bernd Weidensteiner, an economist at DZ Bank in Frankfurt, said a cooling in export demand was already evident. “We can already see an impact from the strong euro and exports to the United States were struggling a bit last year,” he said. “Export growth rates will probably weaken gradually over the coming months.” Rainer Sartoris at HSBC Trinkaus in Duesseldorf said while German exports were looking strong at the start of the year it was questionable whether such growth rates could be sustained for the rest of 2008. “The strong euro and the weakness of the US economy would suggest not,” he said. (Reuters)