German, French trade data hit by falling exports

9th October 2014, Comments 0 comments

The economic skies above the eurozone darkened again on Thursday as data showed a sharp drop in exports from its two biggest economies, Germany and France.

German exports contracted by a massive 5.8 percent in August -- the steepest drop since January 2009 -- causing the trade surplus to shrink to 17.5 billion euros.

In neighbouring France, exports dropped by 1.3 percent, pushing the trade deficit up to 5.8 billion euros, the highest figure since January.

France's big trade deficit is worsening with the United States and with Asia, notably because of a decline in Airbus deliveries.

The German statistics office Destatis explained that the late timing of the summer holidays -- in August instead of in July -- had weighed on economic activity.

German factory orders and industrial output had already fallen in August for the same reason. However, analysts have so far insisted that the weakness will be short-lived.

But the disappointing export data could now suggest that the fallout from the Ukraine crisis is proving more severe than initially anticipated.

The data showed that exports to the EU rose by 2.0 percent, with eurozone exports edging up by just 0.2 percent. Exports to countries outside Europe, however, slumped by 4.7 percent.

"The German economy has experienced an extremely sharp stand-still in August. Industrial production, new orders and exports were down. And the magnitude of the fall brings back memories of the peak of the financial crisis in early 2009," said ING DiBa economist Carsten Brzeski.

The development was not easy to explain, he said.

"Of course, the cooling of many export destinations combined with increased uncertainty stemming from the Ukrainian crisis look like the main drivers of the slowdown but in our view fall short explaining the entire story," he said.

- 'Miracle' needed -

"Looking ahead ... the economy seems to need a small miracle in September to avoid a recession in the third quarter," he warned.

The German economy contracted by 0.2 percent in the second quarter and a renewed drop in the third quarter would technically put the country in recession.

Berenberg Bank economist Christian Schulz said "evidence of a German slowdown is more prevalent in imports, which fell for a second successive month and are heading for a 0.6-percent decline in the third quarter."

He pointed the finger at the Ukraine crisis, "which triggered the sizeable decline in German business confidence."

Nevertheless, as the uncertainty from that crisis faded, "a fundamentally sound German economy should rebound quickly. We expect a return to significant growth in early 2015." Schulz said.

BayernLB economist Stefan Kipar said Europe's economic sanctions against Russia were likely to "put the brakes on the economy for the foreseeable future."

While the German trade surplus is a main driver of the German economy, and by repercussion is vital to the rest of the eurozone and European Union, the structural deficit in France is a central concern for the government in Paris.

Stalled reforms being pushed by the administration of President Francois Hollande are aimed at raising competitiveness in industry, largely to boost exports and correct this deficit.

Meanwhile, the mainstay of the French economy, internal consumption, is in a bad way. Data from research group Markit on Monday showed that French retail sales fell by the biggest amount for 18 months in September.


© 2014 AFP

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