Weak German output and trade data no sign of long-term slowdown

By Joseph Nasr

BERLIN (Reuters) – German industrial output fell unexpectedly for the second month in a row in January and exports also sank, data showed on Friday, adding to signs that Europe’s largest economy started the year on a weak footing.

Analysts said the data did not signal a structural slowdown but was largely seasonal. Economic activity in Germany typically slows down in the winter months because of extended holidays.

Industrial output fell by 0.1 percent, its second consecutive fall after a dip of 0.5 percent in December and confounding expectations in a Reuters poll for a 0.5 percent rise, data from the Economy Ministry showed.

Separate figures from the Federal Statistics Office showed both exports and imports had fallen unexpectedly by 0.5 percent in January, undershooting a Reuters forecast for a 0.3 percent increase in exports and stagnating imports.

The seasonally adjusted trade balance was unchanged at 21.3 billion euros ($26.22 billion), the data showed.

The figures come one day after industrial orders slumped by a more than expected 3.9 percent in January.

“The weak start to the new year is nothing new for the German economy,” Carsten Brzeski of ING Diba said in a note to clients. “It is a phenomenon witnessed more often in recent years that German economic data has been overly sensitive to seasonal effects and vacation planning.”

Unusually warm weather in January resulted in activity in the energy sector falling by 3.3 percent. Construction sank by 2.2 percent, a breakdown of the output data showed. Manufacturing output was hampered by workers’ strikes.

“We expect production to rebound in February,” Stephen Brown of Capital Economics wrote in a note. “After all, unseasonably cold weather will have boosted energy output and, more generally, the business surveys paint a positive picture of underlying conditions.”

DIALOGUE, NO TRADE WAR

The prospects for the German economy look rosy, with capacity utilization at its highest level since 2008 and companies reporting full order books.

U.S. President Donald Trump’s import tariffs are one of the main risks for Germany, which last year exported more to the United States than any other country.

“Some darker clouds have appeared at the German economic sky,” said Brzeski, referring to Trump’s steep tariffs. “New protectionism would definitely hurt the self-proclaimed export world champion.”

German Economy Minister Brigitte Zypries told her U.S. counterpart in a letter on Thursday that the tariffs could prompt other countries to use national security as a reason for introducing trade restrictions, which would undermine global trade rules.

But Dieter Kempf, president of Germany’s BDI industry association, said he did not believe the era of free trade was over after Trump’s announcement of tariffs on steel and aluminum imports.

He said the European Union, which has threatened to impose its own tariffs on U.S. imports in retaliation, should not over-react to Trump’s measures.

But “the U.S. needs to feel some pressure”, he added, urging dialogue to avoid an all-out trade war.

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