German Exports Fall as Global Slowdown Cools Demand

By Christian Vits

Sept. 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined more than economists forecast in July as cooling global growth curbed demand.

Sales abroad, adjusted for working days and seasonal changes, fell 1.7 percent from June, the Federal Statistics Office in Wiesbaden said today. Economists expected a drop of 1.1 percent, the median of 10 forecasts in a Bloomberg News survey showed. In the year, exports rose 7 percent.

Exporters are grappling with a slowdown in the economies of their main trading partners. Europe's gross domestic product shrank 0.2 percent in the second quarter and may not recover in the third, raising the risk of the region's first recession since the euro was introduced in 1999. While oil prices fell 28 percent from a July record, they're still up almost 40 percent over the past year, boosting inflation and damping the outlook.

``Today's result matches recent negative data,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``There's a risk of a drop in gross domestic product in the third quarter. We don't see a significant recovery anytime soon.''

Imports rose 7.4 percent from June. That's the biggest gain since June 2002. In the year, imports gained 16 percent.

The trade surplus narrowed to 13.9 billion euros ($20 billion) from 19.9 billion euros in June. Economists forecast a surplus of 17.5 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 11.8 billion euros from 18.9 billion euros in June.

Dropping Orders

German factory orders unexpectedly fell in July, extending their longest-ever declining streak and increasing the likelihood that the economy is heading for a recession.

The German economy contracted 0.5 percent in the second quarter and may not recover in the third as investments falter and consumer spending slumps. The VDMA lobby has said that plant and machine orders dropped for a third straight month in July, led by sliding foreign demand.

German business confidence declined to a three-year low last month and consumer optimism fell to the lowest level in five years. Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit.

Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank, had a net loss in the first six months of the year following writedowns related to the credit-market collapse, the company reported on Aug. 28.

Bertelsmann AG, Europe's largest media company, cut its 2008 profit forecast after advertisers slashed marketing budgets to cut costs amid the economic slowdown.

Asian Demand

Some companies are trying to offset falling European and U.S. orders by expanding in Asia and oil-exporting countries. German exports to India more than tripled in the four years through 2007 to 7.4 billion euros, the statistics office said.

Adidas AG Chief Executive Officer Herbert Hainer last week repeated the company's forecast, saying growth in emerging markets following this summer's Beijing Olympics will drive sales at the second-largest sporting-goods maker.

Shipments to countries outside the European Union rose 10 percent from a year earlier, today's report showed. Exports to EU member states increased 5.4 percent from July 2007. Imports from within the EU trade bloc rose 13.7 percent from a year ago.

Still, the German government forecasts growth will slow to 1.7 percent this year and 1.2 percent in 2009 from 2.5 percent in 2007. Economy Minister Michael Glos said Aug. 26 the economy is ``exposed to a serious economic stress test.''

To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net