Surging exports lend a fillip to flagging German economy

Germany’s exports rose unexpectedly in October, with demand from beyond Europe offering a boost to the continent’s largest economy, which has teetered on the brink of recession in recent quarters.

Exports grew by 1.2 per cent, statistics office data showed on Monday, defying analysts’ predictions that it would shrink by 0.7 per cent. That will raise hopes the manufacturing powerhouse can avoid contracting in the final quarter, despite a string of negative indicators in recent weeks.

The surprise uptick was mirrored by the results of Sentix’s survey of investor sentiment, which showed market participants cheered by strong demand from non-Japan Asia, driving their expectations for the German economy to their most positive level in almost two years.

The surprise increase in exports was mainly driven by strong demand from non-European countries. Sales to European Union countries were up 0.1 per cent compared with a year ago but the value of German goods sold to non-European countries rose by 4.6 per cent.

“After last week’s disappointing industrial data, this morning’s trade data brought some welcome relief for the economy,” said ING’s Carsten Brzeski.

But while he pointed to continuing weak order books as grounds not to be too optimistic, Sentix managing director Patrick Hussy said the research group’s survey of 5,000 investors suggested the eurozone had dodged recession.

Germany, Europe’s largest economy and an export powerhouse, has been hit by trade conflicts between China and the United States, but Sentix’s survey showed investors were optimistic about its future because of strong Asian growth.

But with Europe continuing to post only anaemic growth, the region’s reliance on Asian demand was underscored on Monday when data showing China’s exports shrinking for the fourth straight month dampened the mood on Europe’s equity markets.

Meanwhile the Volkswagen’s German plants need to boost efficiency to match overseas operations, production chief Andreas Tostmann was quoted as saying, targeting 2 billion euros ($2.2 billion) in savings by 2023.

German carmakers, including Volkswagen’s Audi brand, have announced thousands of job cuts in recent weeks to address an expected 5 per cent drop in global auto sales this year, with declines likely to spill into 2020. “The pace of improvement is better abroad. In Germany, despite all the successes we’ve achieved, we have to do better,” Tostmann told trade journal Automobilwoche. Tostmann wants to implement the savings in the production of VW branded cars through a bundle of measures on top of automation, including a leaner logistics operation.

Reuters