German exports drop

German exports fell in August for the second consecutive month, narrowing the trade balance and adding to concerns that a stronger euro may weigh on the pace of Europe's economic recovery. Data on Friday from the Federal Statistics Office showed that exports fell by 0.4 percent from July, while imports rose 0.9 percent, adjusted for seasonal swings.
A Reuters poll had forecast exports would fall 0.3 percent on the month in August, with imports seen rising by 0.4 percent. The figures come as world financial leaders gather for meetings in Washington with concerns over competitive devaluations of currencies high on the agenda.
"A new cloud seems to be hanging over the outlook for exports," said ING Financial Markets analyst Carsten Brzeski. "Since early June, the euro has gained more than 16 percent against the US dollar. (...) No doubt about it, a stronger exchange rate will eventually have an impact on exports and growth." The figures yielded a trade surplus with the rest of the world of 11.7 billion euros in August, down from 12.6 billion in the previous month and well below forecasts of a surplus of 12.5 billion euros.
"It looks as if foreign trade won't contribute to growth in the third quarter," said Alexander Koch from UniCredit. "This doesn't mean however that the outlook for exports has worsened. We are simply seeing a breather or normalisation after the very strong prior growth."
Exports have been the main driver behind Germany's recovery from its sharpest post-war recession last year. The economy grew at 2.2 percent in the second quarter, its fastest rate since reunification. However, economists expect the pickup to slow in the second half of 2010, not least because of the gloomy outlook for some of Germany's main trading partners.
Last week's purchasing managers' survey showed growth in Germany's manufacturing sector cooled in September to its slowest pace since the start of the year, while Monday's equivalent poll for the services sector revealed the slowest expansion in three months.
"After the growth sprint in the second quarter, the German economy has now throttled (back) a bit and is cruising along," said Brzeski, adding however that the underlying trend was still upwards. "Exports should remain an important growth driver. The recent increase in foreign orders, particularly from euro zone countries, shows that demand for German products is still alive and kicking.