German May Exports Decline Most in Almost Four Years

By Gabi Thesing

July 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined the most in almost four years in May, as a cooling global economy and a stronger euro curbed demand.

Sales abroad, adjusted for working days and seasonal changes, decreased 3.2 percent from April, the Federal Statistics Office in Wiesbaden said today. That's the biggest drop since June 2004. Economists expected a gain of 0.5 percent, the median of 11 forecasts in a Bloomberg News survey showed.

Exporters are grappling with the euro's 15 percent appreciation against the dollar and an 18 percent gain against sterling in the past year. That's eroding competitiveness just as a U.S.-led global slowdown and record oil prices cool the world economy. In China, export growth probably slowed in June.

``We can't expect much support from the export side,'' said Matthias Rubisch, an economist at Commerzbank AG in Frankfurt. ``We will only see slight gains in the coming months. Over the past few weeks, the economic outlook has considerably worsened.''

From a year earlier, exports rose 2.5 percent, today's report showed. The trade surplus narrowed to 14.4 billion euros ($23 billion) from 18.8 billion euros in April. Economists forecast a surplus of 17.3 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 7.5 billion euros from 15.5 billion euros in April.

Production Drops

Manufacturing orders in Germany unexpectedly fell for the sixth month in succession and industrial production declined for a third, reports showed over the past week.

German consumer, business and investor confidence fell last month. Plant and machinery orders fell the most in three years in May, the VDMA machine makers association said last week.

``The stronger euro is starting to hurt,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``Foreign orders have seriously dropped in recent months and with weak domestic demand not offsetting the shortfall, economic growth in the second quarter may contract.''

Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund in April forecast world growth would slow to 3.7 percent this year from 4.9 percent in 2007.

Australia, Dubai

Oil prices above $135 a barrel are fanning inflation and eroding demand. About 50 countries now have inflation of more than 10 percent, a Morgan Stanley study showed last month.

Some companies are trying to offset falling European and U.S. orders by expanding in oil-exporting countries. Lanxess AG, Germany's biggest publicly traded specialty-chemicals maker, is sticking to its full-year profit targets on demand from Asia.

Hochtief AG, Germany's biggest construction company, won three orders valued at more than 340 million euros ($540 million) to maintain roads and build apartment towers in New Zealand, Australia and Dubai.

Shipments to countries outside the European Union rose 4.2 percent from a year earlier. Exports to EU member states increased 1.5 percent, while imports gained 5.7 percent.

Still, after the fastest economic expansion in 12 years in the first quarter, Europe's largest economy may shrink in the second quarter, Germany's Deputy Economy Minister Walther Otremba said June 24.

To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net