German exports slump as euro crisis bites
Although Germany had enjoyed record-breaking exports in earlier in the year, the end of 2011 revealed a less optimistic reality. “It was a bad December through and through,” Ulrike Rondorf ,an economist from Germany’s second largest bank, Commerzbank, told AFP. Commerzbank was downgraded by Moody’s on Wednesday.
BERLIN — The good news is that German exports in 2011 broke all records. The bad news is that they then slumped considerably in December.
In fact, German exports topped 1 trillion euros for the first time ever, but the euro crisis impacted results at the end of the year, with demand for German goods dropping at the fastest rate in almost three years.
The Federal Statistics Offices announced the figures for 2011 on Wednesday showing that the country had exported goods and services worth 1.06 trillion euros ($1.4 trillion). That was an impressive 11.4 percent increase on 2010.
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However, exports declined by 4.3 percent in December, the steepest drop since January 2009. Economists expected a decline, but only of roughly 1 percent. It would seem the euro zone’s debt crisis in particular affected demand. In December, exports to fellow euro zone countries dropped back by 3.3 percent while exports outside of the euro zone increased by 14.7 percent.
Although Germany has increasingly turned to emerging markets outside of Europe, allowing it to rebound quickly from the initial slump following the onslaught of the financial crisis, the euro zone is still a vitally important market. With austerity measures biting in many struggling economies, and with fears of contagion rife late last year, it is hardly surprising that demand for German goods would be affected.
This was the second piece of bad news this week after the Economy Ministry on Tuesday announced that industrial production had slumped by 2.9 percent in December after stagnating in November.
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"It was a bad December through and through," Commerzbank economist Ulrike Rondorf told AFP. "Following the plunge in industrial production, the steep fall in exports is the second poor German data release for December."
Germany has largely relied on exports to fuel its economy, although domestic demand is starting to play a more important role. In fact, imports in 2011 rose to 902 billion euros, from 797.1 billion euros the previous year. Yet, predictions that imports would increase by 0.6 percent in December proved optimistic. Instead they also slumped by 3.9 percent.
The poor figures for last year’s final month mean it's likely that the German economy contracted more than thought in the final quarter of 2011. The Statistics Office has already said that GDP likely shrank by around 0.25 percent in the last three months of 2011, but concrete figures won’t be released until next week.
Economy Minister Philipp Roesler said that while 2011 as a whole had been a record year for German exporters, the situation was "currently more difficult, in view of the current phase of weakness."
Nevertheless, he argued, the German economy "remains highly competitive and will know how to use its growth opportunities when the global economy recovers.”