German exports fall, euro zone economy worries

On top of soaring prices and weak consumption, euro zone growth has added another drag: weakening German exports. Strong German exports have been a driver of economic growth in the 15-nation euro zone. But German exports continued to come under pressure due to slowing global commodity demand and an overly strong euro. German exports fell in May for the third time in the past five months, data from Germany's statistics office showed on Wednesday. Germany's exports fell 3.2% in May to 82.6 billion euros ($129.31 billion) from 85.3 billion euros in April on a seasonally adjusted basis; imports edged up 0.7% in the month from 67.5 billion euros the previous month to 68 billion euros. German exports to all trading partners, including euro zone countries, slowed in the month, data showed. GlobalEconomicsINGFinancialMarkets economist Kasten Brzeski (CarstenBrzeski) said the data confirmed that the German export industry finally failed to withstand the pressure. Economists said a slowdown in German exports would have an impact across the euro zone, given that local demand is now under pressure from rising energy and food costs. UniCredit economist Andreas Rees said the German economy was very, very… unlikely to slip into recession, but the latest figures suggest Germany will have to face a slowdown in growth and a drop in job creation over the next 12 to 18 months unfavorable situation. Data released earlier this week showed German industrial output unexpectedly fell 2.4% in May, the third straight monthly decline. French exports also fell for the month. French customs announced on Wednesday that French exports in May fell to 34.72 billion euros from 35.31 billion euros in the previous month, and the month's trade deficit widened to 4.74 billion euros from a revised 3.74 billion euros last month. Moody's Economy.com economist Katrin Robeck (Katrin Robeck) said that 15% of France's exports are exported to Germany, so the German economic slowdown will undoubtedly bring a blow to France, the second largest economy in the euro zone. Last year, German exports accounted for 46.7% of its gross domestic product (GDP), and this year the share is expected to top 47%, according to UniCredit's Rees. Analysts are reassessing their GDP forecasts for the euro zone, considering that German economic growth is likely to stagnate or deteriorate over the next two quarters. The European Central Bank (ECB) has acknowledged that the euro zone's economic growth will be weaker than expected in the second quarter. Eurostat revised downward its first-quarter economic growth figures on Wednesday. On a revised basis, the euro zone economy expanded by 0.7% in the first quarter from the previous quarter (previously estimated at 0.8%) and by 2.1% from a year earlier (previously estimated at 2.2%). However, the downward revision to economic growth is unlikely to have a significant impact on the ECB's interest rate decision. Taking into account unfavorable factors such as soaring oil prices, credit crunch, a stronger euro, and slowing demand in some key export markets, the euro zone's economic performance was still strong in the quarter, even if the growth rate was revised downward. But more economists see a marked deterioration in the second quarter. BNP Paribas economist Ken Wattret (Ken Wattret) pointed out that the European Central Bank may still unexpectedly turn to a rate cut stance due to the unfavorable conditions of the euro zone and German economies in the second quarter. Economic growth in the euro zone will slow significantly in the coming quarters, mainly dragged down by weak industrial production and slowing private consumption growth, three major European economic research institutes said in a joint report on Wednesday. The three agencies predict that the euro zone economy may stop growing in the second quarter, after growing by 0.7% in the first quarter. The three major institutions also expect that, after seasonal adjustment, the real GDP growth in the euro area in the third and fourth quarters is 0.3%, and the GDP growth rate in 2008 may be 1.6%. The German Institute for Economic Research (Ifo), the French National Institute for Statistics and Economic Research (Insee) and Italy's Isea said in a joint report that the contribution of local demand to economic growth has fallen sharply, while global economic growth is gradually slowing down. Contribution to economic growth will become negative.