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TRADE

Exports top €1 trillion despite euro crisis

German exports topped €1 trillion for the first time in 2011, but fell at year-end as the eurozone debt crisis hit demand for goods made in Germany, official data showed on Wednesday.

Exports top €1 trillion despite euro crisis
Photo: DPA

Europe’s biggest economy exported €1.06 trillion ($1.4 trillion) in the whole of last year, exceeding the one-trillion mark for the first time, the national statistics office Destatis said in a statement. Imports also rose to a record €902 billion.

Exports declined by 4.3 percent in December alone to their lowest level since April, as the effects of the region’s debilitating debt crisis increasingly made themselves felt, the data showed.

And with imports also falling by 3.9 percent, Germany’s trade surplus – which had ballooned to €158.1 billion throughout the whole of 2011 – contracted to €13.9 billion in December.

The full-year data place Germany as the world’s number two exporter behind China which posted exports worth a total €1.432 billion and a trade surplus of €117 billion in 2011.

China, along with the eurozone’s second-biggest economy, France, are Germany’s main trading partners.

But France posted a trade deficit of almost €70 billion in 2011. France has a structural trade deficit and is increasingly looking to the German model as a guide to raising competitiveness and exports.

On a 12-month basis, exports to fellow eurozone countries – which buy around 40 percent of all German exports – declined by 3.3 percent in December, while exports to countries outside the single currency area jumped by 14.7 percent.

“It was a bad December through and through,” said Commerzbank economist Ulrike Rondorf.

“Following the plunge in industrial production, the steep fall in exports is the second poor German data release for December,” she said.

Economy Ministry data on Tuesday showed German industrial production dropping by a bigger-than-expected 2.9 percent month-on-month in December after stagnating in November.

On one hand, the trade data probably reflected feeble demand, particularly in the eurozone, Rondorf said. On the other, it could be partially attributable to calendar effects, the economist suggested.

“We expect the German economy to have contracted by 0.3 percent in the final quarter of 2011 compared with the third quarter,” she said.

Annalisa Piazza at Newedge Strategy also said the trade figures “don’t bode well for gross domestic product in the fourth quarter, as the contribution to growth might be negative over the quarter.”

She estimated that German GDP contracted by around 0.2 percent quarter-on-quarter in the October-December period.

“But we see downside risks now that net exports have been quite poor in December and industrial output showed a large contraction in activity in December,” the economist said.

“That said, prospects for 2012 remain relatively optimistic. Business confidence indicators have returned in expansionary territory in January and there are signs of consolidation in the German labour market that – in the medium term – will continue to support domestic demand,” Piazza said.

The statistics office Destatis has already estimated that GDP likely shrank by “around a quarter of a percentage point” in the fourth quarter of 2011. More concrete numbers are scheduled to be published next week.

Economy Minister Philipp Rösler said that while 2011 as a whole had been a record year for German exporters, the situation was “currently more difficult, in view of the current phase of weakness.”

Nevertheless, the German economy “remains highly competitive and will know how to use its growth opportunities when the global economy recovers,” the minister said.

AFP/mry

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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