BERLIN (Sept 7): German exports and industrial output both fell unexpectedly in July, hit by US President Donald Trump's protectionist trade policies and bottlenecks in the auto sector caused by new environmental standards.
The Federal Statistics Office said on Friday that seasonally adjusted exports fell by 0.9% on the month, while imports surged by 2.8% — the strongest rise in almost four years and a record volume of 94.5 billion euros (US$110.01 billion).
A Reuters poll had pointed to a rise of 0.2% in both. Separate data from the Economy Ministry showed industrial output dropped by 1.1%, confounding the Reuters forecast for a 0.2% rise.
"The summer dip, in our view, seems to be driven by uncertainty stemming from global trade tensions and once again the summer vacation period," said ING economist Carsten Brzeski.
Trump has triggered trade disputes with China, Europe and many others regions by imposing steep tariffs on a broad range of products in his pledge to protect American jobs against what he calls unfair trade practices.
Last month, Salzgitter, Germany's No.2 steelmaker, warned of a rise in imports into the European Union. It stuck by its financial guidance for the current year despite a strong first half, citing "uncertainty from trade policies and their possible impact".
The Economy Ministry said German industrial output would likely regain momentum soon after a muted start to the third quarter, which was depressed by "temporary bottlenecks in passenger car registrations under the new driving cycle".
Those bottlenecks stem from a new pollution standard - the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) — for which some German car models have not yet gained regulatory clearance.
"As bad as the latest German data may be, it is a special effect and not a fundamental issue," UniCredit economist Andreas Rees wrote in a research note.
"To be sure, WLTP creates uncertainties to our short-term growth forecasts in the second half of 2018. However, it is not a persistent pattern and a rebound in (auto) production will follow sooner or later," he added.
Brzeski agreed: "This week's disappointing industrial data are no need to panic." On Thursday, industrial orders fell by 0.9% in July after a revised plunge of 3.9% in the previous month.
"The strongest assets of the German economy currently are the weak euro and strong domestic demand on the back of low interest rates, record high employment and wage increases," Brzeski added.
Germany's domestic economy is in robust form.
The Ifo economic institute said on Thursday it had raised its 2018 growth forecast for the German economy to 1.9 percent from 1.8 percent previously, citing a better-than-expected performance in the first half of the year.