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German exports plunge as euro strengthens, tariffs cloud outlook

BERLIN (Reuters) - German exports plunged unexpectedly in February, posting their biggest monthly drop in more than two years and narrowing the country’s trade surplus, data showed on Monday, another sign that growth in Europe’s biggest economy may have peaked.

FILE PHOTO: A container ship is seen at the shipping terminal Eurokai in the Port of Hamburg, Germany November 6, 2017. REUTERS/Fabian Bimmer

Commentators blamed the recent strengthening of the euro, which makes German goods more expensive outside the euro zone. A trade dispute between China and the United States is also clouding the outlook for exporters.

Seasonally adjusted exports fell by 3.2 percent on the month, the steepest decline since August 2015, data from the Federal Statistics Office showed. Imports dropped by 1.3 percent.

A Reuters poll had forecast exports would edge up by 0.2 percent on the month and imports would rise by 0.3 percent.

“It looks as if we have surpassed the top of the economic upswing,” HSBC Trinkhaus analyst Lothar Hessler said, adding the stronger euro probably caused the decline.

That analysis was backed by a geographical breakdown that showed exports to countries outside the single currency bloc were particularly weak.

“The German economy will continue to grow, but with less momentum,” Hessler said.

Germany’s gross domestic product expanded 2.2 percent last year, the strongest rate in six years. Economists had expected growth to accelerate in the first three months of 2018 after reaching 0.6 percent quarterly growth at the end of 2017.


But Andreas Scheuerle from DekaBank said the data was now suggesting a disappointing first quarter.

“It’s hard to explain the reasons for this weak start to the year, because the good economic conditions have not changed over the past three months,” Scheuerle said. Record employment and rising wages were a good omen for domestic demand, he said.

A separate report on Monday showed investor morale in the euro zone deteriorated in April for the third straight month on concerns about a slowdown in global growth as trade tensions rise between the United States and China.

The German trade report showed the country’s seasonally adjusted trade surplus narrowed to 19.2 billion euros ($23.6 billion) from 21.5 billion euros in January, the lowest since January 2017. The Reuters consensus forecast was for 21.4 billion euros.

Germany’s wider current account surplus, which measures the flow of goods, services and investments, edged up to 20.7 billion euros from 20.3 billion euros in January, unadjusted data showed.

DekaBank’s Scheuerle said that protectionist threats from U.S. President Donald Trump could hardly be the main reason for the February decline in German exports. But the prospect of getting caught in the cross-fire of a U.S.-China trade war is worrying German businesses.

The introduction of new tariffs would be an economic dead end that could hit German exporters particularly hard, said Volker Treier, economist at the DIHK Chambers of Commerce and Industry.

DIHK said last week an escalation of the dispute over import duties could harm the global economy and weaken demand for German goods and services.

Official data last week showed German industrial output fell by the most in more than two years in February. The Economy Ministry said industry was losing momentum.

Chancellor Angela Merkel is due to visit U.S. President Donald Trump on Friday.

Merkel’s trip comes three days after French President Emmanuel Macron’s state visit to Washington, giving both leaders a chance to argue for making permanent a European Union exemption from U.S. import duties on steel and aluminum. The exemption now expires on May 1.

Additional reporting by Paul Carrel, editing by Larry King