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UPDATE 1-German exports and imports fall more than expected in May
July 8, 2014 / 6:45 AM / 3 years ago

UPDATE 1-German exports and imports fall more than expected in May

* Import drop is steepest since November 2012

* Data comes on heels of other weak indicators

* But export fall is also due to strong rise last month

* Import drop bigger concern, points to domestic weakness (Adds details, reaction)

By Annika Breidthardt

BERLIN, July 8 (Reuters) - German exports and imports dropped much more than expected in May, data showed on Tuesday, coming on the heels of other soft indicators that have signalled Europe’s largest economy is losing momentum.

Exports - the traditional backbone of Germany’s economy - struggled last year and fell in three of the first five months this year, weighing on overall growth and making the economy reliant on imports. They, however, slumped in May.

Figures from the Federal Statistics Office showed seasonally-adjusted exports fell by 1.1 percent on the month, while imports dropped 3.4 percent, the steepest monthly fall since November 2012.

The trade surplus widened to a seasonally adjusted 18.8 billion euros from a revised 17.2 billion in April and compared with a Reuters consensus forecast for 16.4 billion.

“A weak May trade release wraps up an overall disappointing month,” said Christian Schulz of Berenberg bank.

The news follows signs from other data - such as a slump in industrial output, weak orders and retail sales - that Europe’s growth locomotive is in for a weaker second quarter than expected.

While some economists are beginning to cut their second-quarter expectations after a strong first quarter, Andreas Rees of Unicredit also pointed to other factors that weighed on exports in May.

“On the one hand the export drop is a reaction to the strong rise in the previous month,” Rees said, referring to an increase of 2.6 percent in April. “On the other hand, the long weekend after the May 1 holiday is likely to have weighed on exports.”

The drop in imports, however, was more worrying as it may signal emerging weakness in the domestic economy.

Domestic demand and a strong labour market drove the German economy to 0.8 percent growth in the first three months of the year, its fastest rate in three years. The government forecasts growth of 1.8 percent for the year as a whole.

Economists polled by Reuters had expected exports to fall by 0.3 percent and imports to increase by 0.5 percent. (Additional reporting by Rene Wagner; Editing by Stephen Brown)

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