Rise in German exports provides some relief from recession fears

German exports posted their biggest rise in almost two years in September, an official data showed, providing some relief amid widespread concerns that Europe’s largest economy will dip into recession in the third quarter.

Germany’s export-reliant manufacturers have been suffering from a slowing world economy and business uncertainty linked to a trade war between the United States and China, and Britain’s planned, if delayed, exit from the European Union.

The Federal Statistics Office said seasonally adjusted exports increased by 1.5% on the month. That was their biggest increase since November 2017 and compared with economist expectations for a rise of 0.4%.

“While there is no doubt that industry is in recession, the entire German economy could have avoided another contraction - and hence a technical recession - at the very last minute,” said ING economist Carsten Brzeski.

The economy shrank by 0.1% in the second quarter, and recent data have suggested manufacturing fared badly in the third, which could put Germany in a technical recession - usually defined as two straight quarters of contraction.

“Today’s trade data suggest that there has been hardly any negative drag from net trade on third-quarter gross domestic product,” he said, adding private consumption looked like it had increased slightly and construction was flat or positive.

Data published this week has painted a mixed picture of the industrial sector, with output falling more than forecast in September while orders rose more than expected. A survey showed Germany’s manufacturers remained stuck in recession in October as new orders fell.

Speaking about Friday’s data, Landesbank Baden-Wuerttemberg economist Jens-Oliver Niklasch said: “This looks like a revival in foreign trade but looking at the whole year, September is more of an outlier”.

He said foreign trade had been rather weak throughout 2019 and added that the risks in overseas trade had declined but not disappeared. A 0.4 decline in exports to non-eurozone European Union countries between January and September compared with the same period last year could be due to Brexit, he said.

The DIHK Chambers of Commerce expects exports to grow by 0.3% this year as a whole before declining by 0.5% next year, which would be their first fall since the global financial crisis.

A panel of economists advising the government said Germany’s long-term upswing had come to an end and said that the export-oriented German economy was particularly at risk from a possible escalation of the trade conflicts. But they did not expect a “broad and deep recession”.

Friday’s data showed imports climbed by 1.3% in September. The trade surplus widened to 19.2 billion euros from an upwardly revised 18.7 billion euros in the prior month.

Economists polled by Reuters had expected imports to be unchanged and saw the trade surplus at 18.1 billion euros.

While construction was stable in the third quarter, weakness was otherwise broad-based, with production declines registered at factories making chemicals, metal products, electrical equipment, machinery and motor vehicles or parts, data from the Economy Ministry showed.

The ministry said the weak patch in German industry was not yet over but business sentiment and an uptick in orders had brightened the outlook for the fourth quarter.

Meanwhile, the European Union’s largest states are pushing for the establishment of a new supervisory authority that would take over from states the oversight of money laundering at financial firms, after a series of scandals at the bloc’s banks.

In a joint statement, Germany, France, Italy, Spain, the Netherlands and Latvia said the 28-country EU needed a “central supervisor” to tackle the flow of dirty money within the bloc’s financial system.

The move comes after European lenders were shut down over money laundering in Latvia, Malta and Cyprus, while top banks from the Baltic and Northern Europe were involved in dodgy transactions worth billions of euros of Russian dirty money through the Estonian branch of Danske Bank, in what is seen as the worst money-laundering scandal on the continent.

The need for an EU supervisor emerged after repeated failures by national watchdogs at spotting and countering money laundering, the statement said.

“Where large financial interests are at stake, there is a risk of national supervisors being influenced directly or indirectly by supervised institutions or interest groups,” the statement said.

Reuters