Sluggish Exports Persist in October: EU Slump Impacts Demand
Efforts to rejuvenate the German export sector remained elusive in October, as geopolitical risks and a sluggish global economy took their toll on the sector, according to Volker Treier, Head of Foreign Trade at the German Chamber of Industry and Commerce (DIHK). The magnitude of these challenges was underscored by a decline in exports in the first three quarters, accentuated by the "enormous bureaucratic and cost burden in Germany" that compromises the country's position in international competition.
The domestic and European markets both showcased a lackluster performance, reinforcing the need for a robust recovery but failing to deliver. Inflation and the ongoing war in Ukraine have been significant impediments, while discussions surrounding competitive location conditions have proved ineffective in restoring investor confidence.
Despite these challenges, German exports totaled 126.4 billion euros in October, with imports amounting to 108.6 billion euros — a decline of 1.2% month-over-month. Compared to October 2022, imports plummeted by 16.3%, resulting in an export surplus of 17.8 billion euros.
Intra-EU trade, representing more than half of Germany's total foreign trade, seesawed in October. German goods worth 67.9 billion euros were exported to the EU, down 2.7% compared to September, while EU imports amounted to 56.9 billion euros, a 2.8% decline.
On the flip side, exports to third countries experienced growth. Significant buyers included the United States, which imported goods worth 13.5 billion euros in October, a 5.7% increase relative to September. Exports to China, which had seen a decline in September, rose marginally by 1.5% to 7.9 billion euros. The United Kingdom witnessed a 5.6% increase in exports, buoyed by total shipments of 6.6 billion euros.
Import activity, however, continued to dominate by major trading partners. China retained its position as the primary source of German imports, accounting for 12.7 billion euros in October. US imports rose by 2.2%, while imports from the United Kingdom decreased significantly by 15.1%.
German trade with Russia suffered a substantial decline, mainly due to the ongoing war in Ukraine. Exports to Russia totaled 0.6 billion euros, down 5.0% month-over-month and 40.5% year-over-year. Imports from Russia rose by 6.6% compared to September but still represented an 88.5% decrease relative to October 2022.
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- Despite these challenges, the BGA advocates for addressing competitive location conditions to spur demand, particularly in Wiesbaden.
- October's export slump was predominantly driven by cooling demand within the EU, as reported by Destatis.
- A marked decline in imports from the EU was observed in the previous year, a trend that persists and has implications for the country's exports.
- The German Chamber of Industry and Commerce (DIHK), led by Volker Treier, emphasized the impact of geopolitical risks and inflation on exports.
- The loaded truck industry was also affected by the export decline, as exporters reduced orders.
- The war in Ukraine has contributed to inflation, placing considerable burdens on businesses, according to the DIHK.
- The German IHK (Chamber of Commerce and Industry) noted that exports to the United States saw a 5.7% increase in October.
- US export growth was primarily driven by demand for German products, while US imports also saw a modest increase, according to Destatis data.
- Chinese imports decreased by 2.4% in October, reflecting the global economic slowdown and geopolitical tensions between China and the West.
- The export-import balance with Russia continued to diminish due to the ongoing war in Ukraine, with only 0.6 billion euros in exports in October.
- The export slump and import volatility have generated uncertainty in the German economy, prompting calls for policy actions to support export-oriented businesses.
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Enrichment Insights:
- Energy Shock from Russia: The discontinuation of natural gas supplies from Russia has substantially increased energy costs for German industries, particularly those in energy-intensive sectors like steel, fertilizer, chemicals, and glass.
- Competitiveness Gap with China: China's industrial policy, which includes subsidies and protectionist measures, has boosted its manufacturing sector, making it a formidable competitor to German producers.
- Decline in Exports to China: The decline in exports to China is due to overcapacity in the Chinese industry, deflation, consumer restraint, and falling investment in traditional industries.
- Sector-Specific Issues: Some sectors, such as the automotive industry and construction, have encountered specific challenges, including an abrupt termination of subsidies for electric vehicles and high interest rates, diminishing orders, and burdensome taxes and bureaucracy.
- Trade Dynamics with the USA and China: Exports to the USA have stabilized, with the US becoming Germany's most important trading partner in 2024. Conversely, cereals and wind turbines, among other products, are seeing reduced demand in China, as its economy struggles with internal challenges and geopolitical tensions. German manufacturers are now focusing on diversifying markets and customer sectors to mitigate the impact of declining exports to China.
