The European economy and German exports

Oil prices keep falling despite a hurricane moving into the Gulf of Mexico and OPEC's 520 thousand barrel output cut. At its meeting today in Vienna the cartel stated that the oil market was oversupplied. Now that fundamentals seemed to creep back into the oil market its worth noting that economic growth outside the U.S. has dramatically slowed down. Last week the president of the ECB during the press conference and the introductory statement to the council's rate decision "confirmed the weakening of real GDP growth in mid-2008". During that meeting the ECB also released its updated growth projections in the EA for the second half of 2008 and 2009. Real GDP growth for the remainder of 2008 is now expected to be between 1.1 and 1.7 percent, down from 1.5 to 2.1 percent in the June projections (see table below).
click to enlarge









The European Commission cut its growth estimate for the euro area this year and predicted a recession for the German economy. Business and consumer confidence keeps plunging in Europe's largest economy, yet inflation has stayed stubbornly high in part due to fairly tight resource utilization. The unemployment rate in Germany is at record low levels. Companies have so far not followed the U.S. example but market participants clearly expect layoffs to pick up in the future. One glimmer of hope for avoiding this unpleasant recession scenario is foreign trade in the form of exports which has so far held up pretty well. The latest export figures in Germany for July 2008 show a decline of 1.7 percent from the previous month. Exports in June were up a strong 4.1 percent. Compared to July of 2007 exports have increased by a healthy 7 percent (see chart below).
click to enlarge











Economic slowdown in the U.S. and China have as of yet not materially impacted export growth in Germany. The report did not specify the amount of trade with individual countries outside the European Union, but released the statistics for exports to "third countries" which were up 10 percent compared to July of last year:

"Germany exported commodities to the value of EUR 32.2 billion to and imported commodities to the value of EUR 26.2 billion from countries outside the European Union (third countries) in July 2008. Compared with July 2007, exports to third countries were up by 10.0% and imports from those countries by 19.6%."



read also: German exports again strong in June 2008
Thursday, August 7, 2008
http://manonthestreet64.blogspot.com/2008/08/german-exports-again-strong-in-june.html

source: German exports in July 2008: +7.0% on July 2007
Press release No. 337 / 2008-09-09
http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/press/pr/2008/09/PE08__337__51,templateId=renderPrint.psml

source: Introductory statement
Jean-Claude Trichet, President of the ECB,
Lucas Papademos, Vice President of the ECB
Frankfurt am Main, 4 September 2008
http://www.ecb.int/press/pressconf/2008/html/is080904.en.html

source: ECB STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA
ECB
http://www.ecb.int/pub/pdf/other/ecbstaffprojections200809en.pdf