German June Exports Rise the Most in Nearly Two Years

By Gabi Thesing

Aug. 7 (Bloomberg) -- German exports rose more than economists expected in June, defying a stronger euro and pushing the trade surplus to a record.

Sales abroad, adjusted for working days and seasonal changes, increased 4.2 percent from May, when they fell 3.4 percent, the Federal Statistics Office in Wiesbaden said today. That's the biggest increase since September 2006. Economists expected a gain of 1.8 percent, the median of 12 forecasts in a Bloomberg News survey showed. The trade surplus widened to 19.7 billion euros ($30 billion) from 14.3 billion euros in May.

Demand from emerging markets like China and Russia has helped German exporters cope with the U.S.-led global economic slowdown and a stronger euro. Still, growth in Germany's main export markets such as France, Spain and the U.K. is slowing as record energy costs curb consumer spending and company investment.

``These monthly figures can be very volatile and this is probably a workday adjustment issue,'' said Nick Matthews, an economist at Barclays Capital in London. ``The strong figures don't mask the fact that the outlook is worsening as the economies in Germany's main export markets are deteriorating.''

The euro rose to $1.5466 from $1.5430 just before the report was released. From a year earlier, exports rose 7.9 percent, today's report showed. Imports fell 0.1 percent from May and rose 5.3 percent from a year earlier. The surplus in the current account, the measure of all exports including services, widened to 18.5 billion euros from 7.5 billion euros in May.

Orders Drop

Germany's economy, which expanded at the fastest pace in 12 years in the first quarter, probably contracted in the second, Deputy Economy Minister Walther Otremba said June 24.

Consumer, business and investor confidence dropped last month and manufacturing orders unexpectedly declined in June for the seventh month in succession, driven by a slump in demand from the euro area.

Exports to EU member states increased 5.9 percent in June from a year earlier, while imports grew 3.8 percent, the statistics office said today. Shipments to countries outside the European Union rose 12 percent from June 2007. Exports to fellow euro area states gained 4.7 percent.

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 last month forecast world growth would slow to 4.1 percent this year from 4.9 percent in 2007.

Record commodity prices are exacerbating the slowdown. Oil rose above $147 a barrel for the first time last month and is 65 percent more expensive than a year ago, while corn and wheat prices climbed to the highest ever this year.

Emerging Markets

The euro region probably contracted 0.5 percent in the second quarter, economists from French bank Societe Generale SA estimate. The U.K. economy, the third-largest destination for German goods, expanded 0.2 percent in the second quarter, matching the slowest pace since 2001.

Some companies are trying to offset falling European and U.S. orders by expanding in emerging markets.

Siemens AG, Europe's largest engineering company, on July 30 reported third-quarter earnings that beat analyst estimates on increased orders for power plants and generator upgrades in Russia and China.

Siemens said this week it will get 10 billion euros ($15.5 billion) of annual orders from China by 2010 as the country boosts spending on utilities and transport networks.

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