German shipments of goods and services abroad posted their steepest fall in almost a year in July, fuelling worries that Europe's largest economy might eventually be hit by a general weakness in global demand.
German exports fell sharply in July as demand weakened from outside the euro currency area, according to data published by the country's statistics office, Destatis, on Friday.
Compared with June, exports dropped by 2.6 percent to 97.1 billion euros ($109.4 billion) in seasonally-adjusted terms - the biggest monthly fall since August 2015. On a year-on-year comparison, the slump was even more significant, showing a fall of 10 percent since July last year.
Sales to countries outside the European Union such as China and the United States suffered the most, indicating that the export-driven German economy was beginning to suffer from sluggish global demand. A steep fall in demand from non-eurozone EU countries, including Britain, was also reported.
The July figures cover the first few weeks after Britain's shock vote to leave the EU, fuelling fears among analysts that the seismic event may have a bigger effect on Germany than expected.
"Either the entire industry took an early and long summer break, or Brexit and a general weakness in Germany's main export partners left another mark on the economy," Carsten Brzeski, chief economist at ING-Diba, told the news agency AFP.
Imports lackluster too
Germany's overall imports - an indicator for domestic demand - were also down in July to 77.7 billion euros, a drop of 0.7 percent. This means that the country's trade surplus shrank to 19.4 billion euros from 21.7 billion euros in June, the statisticians said.
The figures are the latest in a series of disappointing data for the German economy, after production took a surprise tumble in July, while demand for industrial orders showed only a slight increase. "The month of July was clearly not a good month for Germany," said Brzeski.
Despite July's dire trade figures, the Munich-based Ifo economic institute still believes that Germany's current account surplus might become the highest in the world in 2016. The current account consists of the balance of trade (exports minus imports), as well as earnings on foreign investments minus payments made to foreign investors.
The surplus Germany is likely to earn from this is estimated to come in at $310 billion this year, overtaking that of China again, the Ifo think tank said on Tuesday.
"The German current account surplus is based on trade in goods," Ifo economist Christian Grimme said, noting that exports had already exceeded imports by $159 billion in the first half of the year.
According to the Ifo data, China's current account surplus is likely to shrink by $70 billion to some $260 billion this year due to weaker exports. Japan would be in third place with an estimated surplus of $170 billion dollar in 2016.
The institute also said the German surplus would be equivalent to around 8.9 percent of gross domestic product, meaning it would once again breach the European Commission's recommended upper threshold of 6 percent.
Brussels and Washington have urged Berlin to lift domestic demand and imports to help reduce global economic imbalances and fuel global growth.
But Berlin has repeatedly rejected such criticism, saying it has already lifted domestic demand by introducing a national minimum wage in 2015 and agreeing on a strong hike in pension entitlements in 2016.
In addition, the government has increased state spending on roads, digital infrastructure and migrants, while sticking to its goal of keeping a balanced budget.
uhe/kd (dpa, AFP, Reuters)