9th October 2014
Fears are mounting over the state of Germany’s economy as new figures show that exports suffered their hardest fall since the financial crisis.
According to Germany’s Federal Statistical Office, exports collapsed by 5.8% month-on-month in August, marking the steepest decline since January 2009. In addition imports receded by 1.3%. It pointed to the timing of the school holidays which caused many factories to close as the main reason for the collapse.
Exports of goods to countries outside the European Union (third countries) amounted to 36.4bn euros in August, while imports from those countries totalled 25.7bn euros. Compared with August 2013, exports to third countries decreased by 4.7% and imports from those countries by 6.3%.
The news will be far from welcome given the economy dropped by 0.2% in the second quarter this year.
Looking at the implications of the weaker figures, Paras Anand, head of European equities at fund manager Fidelity Worldwide Investment believes there is a risk that a focus on short run data is missing the medium term recovery story, not simply of the German and broader European economy but also for corporate earnings across Europe.
He said: “Whist there is clearly some softening of demand in key export markets, there is the risk that investors miss the broadening mix of economic growth in Germany in particular where private consumption is a growing component of GDP. Additionally, the weakening euro is likely to be supportive for much of the corporate sector, not simply in terms of a translational impact on reported earnings but more fundamentally in terms of the relative competitive positioning of European companies versus their Global peers. Whilst the short term response is understandable, it is possible that the bigger picture is being missed. There is the risk that investors miss the broadening mix of economic growth in Germany where private consumption and increasing exports are a growing component of GDP.”
Anand added that the temporary interruption from the geopolitical issues around the Ukraine has created short term nervousness in the export market. “This should not mask the potential of German companies and their much larger export diversification into the structurally growing parts of the world,” he said.