German exports slump, growth likely at risk

The stumble in Germany's export machine has been in focus today with the release of the country's merchandise trade report for August. Later, US unemployment claims will offer new perspectives on the outlook for the macro trend in the world's biggest economy.

After the release of weak industrial production and factory orders in the same month, which were at odds with high business confidence, September's data will be scrutinized for signs that German growth is at risk despite the strength of domestic demand, given its excessive reliance on external trade.

Germany's trade surplus shrunk in August as exports plunged. With exports falling almost twice as fast as imports, both exports and imports collapsed during the month, probably reflecting the weakness in sales to Asian emerging countries.

Germany's trade surplus (value) narrowed to €15.3 bn in August from €25.0 bn in July. This comes on the back of exports having dropped at their fastest pace since the 2009 financial crisis (-5.2% MoM), accompanied by a smaller fall in imports (-3.1% MoM). However, on a year-on-year basis, both exports and imports were higher by 5.0% and 4.0%, respectively.

This week's disappointing updates on factory orders and industrial production have fanned the flames of worry over the potential for blow-back in Germany's economy. The critical factor is the slowdown in China and other key emerging markets, a dip that's expected to take a toll on the export machine in Europe's largest economy.