German Exports Drops Bigger than Predicted by Experts

Exports from Germany dropped 1.2 percent on the month in October after a strong gain the previous month - a sharper decline than economists had expected.

According to CNBC, the drop reported Wednesday followed a 2.6-percent gain in September. Economists had forecast a 0.6-percent decline. The Federal Statistical Office said that imports dropped 3.4 percent after a slightly larger gain the previous month. That meant Germany's trade surplus widened to 20.8 billion Euros ($22.6 billion) from 19.4 billion Euros in September.

NG-DiBa economist Carsten Brzeski said October's export decline appears to be "a technical correction after strong September data, rather than a structural shift." He also said that it is "very hard" to attribute the drop to the emissions-rigging scandal at automaker Volkswagen that erupted in mid-September, according to ABC News.

Brzeski noted that the European Central Bank's quantitative easing programme and more specifically the weak euro have been an extremely well-targeted stimulus package for German exports.

FinanzNachrichten reports that to too many economic slowdowns and geopolitical conflicts around the world, exports will continue having troubles gaining more momentum, Brzeski added. However, as long as the ECB continues with easing, exports should remain supportive to growth.

In the third quarter, economic growth slowed to 0.3 percent due to weak foreign trade and investment. However, the Bundesbank last week said economic growth will pick up to 1.8 percent next year as exports are set to recover. On a yearly basis, growth in exports eased to 3.3 percent from 4.3 percent. Similarly, the increase in imports slowed to 3 percent from 4 percent.

On an unadjusted basis, the trade surplus fell slightly to EUR 22.5 billion from EUR 22.8 billion in September. It was expected to decrease to EUR 21.7 billion.  At the same time, the current account of the balance of payments showed a surplus of EUR 23.0 billion, which were below last month's EUR 25 billion surpluses.

Data for October manufacturing orders and industrial production released Friday and Monday, respectively, provided inconclusive evidence about the health of Germany's industrial sector. Monday's export figures are likely to fuel concerns about industrial activity rather than alleviate them.