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German exports surge in June but outlook weak

BERLIN - German exports grew in June at their fastest rate since September 2006, official data showed on Thursday, widening the trade surplus but doing little to dispel concerns the economy is in for a period of protracted weakness.

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Exports rose by 4.2 percent on the month in seasonally adjusted terms to 85.9 billion euros ($133.2 billion) -- a new monthly record -- and imports fell by 0.1 percent, the Federal Statistics Office said.

The trade surplus widened to 18.1 billion euros from a revised 14.5 billion in May. The surge in exports followed a 3.4 percent decrease a month earlier.

A Reuters poll of 33 economists last week gave a mid-range forecast for the trade balance to widen to 15 billion euros ECONDE. Economists had expected a 1.8 percent gain in exports and a 1.4 percent rise in imports.

‘The considerable increase in exports is of course a counter-reaction to the weak May. Overall, exports are down on the quarter,’ said Ulrike Kastens, analyst at Sal. Oppenheim.

Exports fell by 0.4 percent on the quarter in the April-June period, and imports declined by 1.8 percent on the quarter, Reuters calculations showed.

‘Export impetus has weakened. The harbingers for this are clear: manufacturing orders from abroad are dropping sharply,’ Kastens said. ‘The euphoria that we saw at the beginning of the year has disappeared.’

The economy grew by 1.5 percent on the quarter in the first three months of 2008, its strongest expansion since 1996. But economic indicators have pointed to a sharp slowdown since.

Manufacturing orders fell by 2.9 percent on the month in June, a seventh straight decline, figures showed on Wednesday.

Companies are battling with a weakening global economic environment and the strong euro, which makes their goods more expensive outside the euro zone.

Heidelberg HDDG.DE, the world's largest printing press maker, said on Tuesday it expected operating profit to fall ‘clearly’ and also blamed the strong euro for its woes.

Strong foreign demand for capital goods has helped Germany be the world's largest exporter of goods since 2003. For years, foreign trade has been a key engine of growth, but the global slowdown now threatens to stall that driver.