German exports drop

June 9, 2009

, FRANKFURT, June  9 – German exports and industrial output posted record drops in April, challenging widely-held views that an historic recession in Europe\’s biggest economy had bottomed out.

German officials and analysts nonetheless expressed confidence Tuesday that the worst was past, even if the road to recovery was not yet lined with green lights.

German exports plunged by 28.7 percent from the equivalent figure last year, data from the national statistics office showed, the biggest drop since German records began in 1950.

Germany\’s export-driven economy is in the midst of its worst recession since World War II, and the government expects gross domestic product (GDP) to shrink by a whopping 6.0 percent this year.

Meanwhile, industrial production fell by 1.9 percent in April from March, far more than an average analyst forecast of 0.5 percent compiled by Dow Jones Newswires.

And on an annual comparison, output was a record 21.6 percent lower as the global economic crisis slammed foreign and domestic demand for German goods.

"German companies still felt the pain in April," UniCredit analyst Andreas Rees said. "But the signs are increasing that they will manage a comeback."

The economy ministry, source of the gloomy production figures, said it too was optimistic for the future.
"The downward trend has slowed noticeably," a ministry statement said.
"The odds that industrial production has hit its lowest point have improved due to stabilising demand … and better confidence indicators," it added.

Several leading indicators, such as the Ifo business confidence index, suggest that a 3.8 percent collapse in first quarter economic activity should mark the trough of the worst German recession since World War II.

That would be good news for Chancellor Angela Merkel, who faces a general election at the end of September.

On Monday, the economy ministry hailed a "noticeable improvement in the medium-term perspective" for German industry after data showed that orders for German goods were stable in April after posting a strong 3.7 percent rise in March.

Industrial orders calculated over two months to smooth out exceptional influences rose for the first time since December 2007.

Germany, a leading global exporter, has been mauled by bearish global demand in the past year, and notoriously thrifty German consumers have done little to compensate by hitting the stores.

But UniCredit economist Alexander Koch noted that "the rate of decline in industry is moderating quickly and considering the latest further improvement in business expectations and new orders, the coming month(s) can be expected to bring nicer figures also for industrial production."

He said the manufacturing sector showed particular weakness in April, with engineering and auto manufacturing leading the declines.

But Koch and Rees both pointed to the fact that Easter holidays, which fell in April this year, probably helped skew the figures lower.

Jennifer McKeown at Capital Economics was slightly less upbeat, commenting that "April’s fall in German industrial production is disappointing" while adding: "At least the rate of decline has slowed since the start of the year."

She concluded that "in all, we still expect the German recession to ease in the second quarter and beyond."

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