German Manufacturers Report Rise in Exports to EU, US

Dec 02, 2015

Rising demand from industrialized countries compensating for weaker sales from developing economies

German exports to Europe and the U.S. have risen strongly so far this year, showing that German manufacturers have brushed off flagging demand in once favored emerging markets by tapping into more robust growth elsewhere.

German exports to the U.S. surged almost 21% in the first nine months of the year from the same period a year earlier, according to data published by Germany’s federal statistical office Monday.

Germany’s trade surplus with the world’s largest economy reached €41.6 billion ($44 billion), up sharply from the €33.6 billion registered in January-September last year.

The numbers come after Germany’s VDMA Engineering Federation announced last week that the U.S. has overtaken China as the top destination for German engineering exports in the third quarter.

The recent slowdown in China raised concern among some economists that it could severely damage Germany’s roughly 200,000 exporters, which are among China’s main western suppliers. But the latest data highlights what has emerged as a key strength of Germany’s export machine—an ability to rapidly adapt to global fluctuations in demand that has helped Europe’s largest economy repeatedly ride out regional slowdowns.

“Germany has always put a lot of effort in fostering client relations. That is paying off now,” said Rainer Hundsdörfer, chairman of ebm-papst group, a manufacturer of industrial fans, in Mulfingen, Germany.

Adding to this, German exporters have benefited from a weaker euro exchange rate to the dollar this year, which has made their products more competitive in the U.S. and in other regions where currencies move in tandem with the dollar.

“Growth drivers have gone into reverse: We’re seeing a renaissance of the industrialized countries in the western world and an episode of weakness in many emerging markets,” said Volker Treier, head of foreign trade at the German Chambers of Commerce and Industry, or DIHK, in Berlin.

Solid U.S. economic growth and the eurozone’s recovery from years of recession or near-stagnation are providing healthy business for Germany’s exporters, economists said.

“Rising demand from the industrialized countries has so far been able to compensate for weaker demand from the developing economies,” said Olaf Wortmann, an economist at VDMA in Frankfurt. The industry group represents more than 3,100 midsize companies.

Destatis said that exports to the eurozone, which make up more than one-third of Germany’s total exports, increased 5.4% in the first nine months of the year compared with the year-earlier period. German trade with the U. K.—which isn't a member of the eurozone—is also booming. Exports to the region jumped 14.2% from last year.

But firms have lowered their expectations for their trade with China amid growing doubts about the resilience of the world’s second-largest economy. Destatis said that Germany’s exports to China fell 2.6% in the first nine months of the year from the same period a year earlier.

“We are still growing in China, although business has slowed down. Brazil is extremely difficult, but we are actually not doing that bad in Russia, as our products are not affected by the international sanctions,” said ebm-papst’s Mr. Hundsdörfer.

German exports to Russia tumbled nearly 28% in the year through September, while exports to Brazil were down 1.2%, Destatis said.

“Business with Russia and Georgia has broken down entirely, but it is still going well in the Middle East, where the made-in-Germany hallmark is still held in high esteem,” said Johannes Perrot, a clockmaker from Calw, Southern Germany.

German exports to the United Arab Emirates are up almost 39% from January-September last year, also because international business with Iran is channeled through the region.

“The positive effect of a weaker euro mustn’t become a sweet poison,” Mr. Hundsdörfer warned. “I urge each and every German company not to get complacent.” The euro traded around $1.06 Monday, compared with levels around $1.40 in spring last year.

 

Source: Wall Street Journal