German exports fell unexpectedly in July, posting their steepest drop in nearly a year, while imports also edged down, data showed on Friday, in a further sign that Europe’s biggest economy started the third quarter on a weak footing.
On Thursday the DIW institute forecast German economic growth would nearly halve in 2017 as Brexit and other risks hit exporters, although it predicted a pick-up to 1.9% this year due to strong domestic demand.
That subdued outlook followed a string of economic data that painted a bleak picture for German manufacturing, with industrial orders barely rising in July and output posting its steepest drop in nearly two years.
On Friday data from the Federal Statistics Office showed seasonally adjusted exports fell 2.6% on the month, following a downwardly revised 0.2% rise in June and undershooting the Reuters consensus forecast of a 0.25% increase.
Seasonally adjusted imports fell 0.7% on the month, the data showed. This was also weaker than the forecast of economists polled by Reuters who had predicted a 0.8% rise.
The surprise fall in exports narrowed the seasonally adjusted trade surplus to €19.4bn from a downwardly revised €21.4bn in June. This was below the Reuters consensus forecast of €22.0bn.
“The German economic engine is likely to start stuttering for a while,” DIW’s statement on Thursday said.
Britain’s decision to leave the EU would limit Germany’s growth prospects in the coming months, it said.
“The Brexit decision is likely to put the brakes on German foreign trade until the middle of 2017,” the institute said.
Britain is Germany’s third-most important export market and uncertainty about London’s future relationship with the remaining 27 EU members is hampering investment decisions.
DIW raised its 2016 growth forecast for the German economy to 1.9% from 1.7%, mainly due to a surprisingly strong performance in the first six months of the year.
But it lowered its 2017 growth forecast for Germany to 1.0% from 1.4%, also citing special factors such as more holidays falling in working weeks next year.
Brexit was expected to cost the German economy 0.3 percentage points of overall growth next year, DIW head Marcel Fratzscher said. The lower number of working days in 2017 would reduce the overall growth rate by another 0.4 percentage points, he added.
Other leading institutes are a bit more optimistic. The RWI think-tank said on Thursday it expected the German economy to grow by 1.9% this year and by 1.4% next. The Kiel-based IfW institute forecasts only a mild economic slowdown to 1.7% in 2017 from 1.9% this year.
Speaking in the Bundestag lower house of parliament, Economy Minister Sigmar Gabriel confirmed the government’s growth forecast of 1.7% in 2016.
This would be on a par with 2015, when the German economy grew by the strongest rate in four years, mainly driven by soaring private consumption and higher state spending.
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