German exports rebounded in May but no full recovery

Following a sharp slump earlier in the year, Germany's exports and industrial output returned to growth in May but still failed to recover fully. According to the Federal Statistics Office, exports grew by 1.1%, surpassing the 0.5% rise forecasted. Although still tentative, and questions still remain over the health of Europe's largest economy, the news will be welcomed in Berlin.

German exports fell unexpectedly by 3.4% in April, leading to a shake up in confidence amongst investors in what is traditionally one of the world's most stable economies.

The month of May also saw an overall rise of 0.3% in industrial output. Removing the energy and construction sectors from that equation, the production output figure stands at 0.9%. Capital goods production was closer to 2%.

Andrew Kenningham, an economist at Capital Economics, warned that May's rise in production did not signal the end of the problems for German manufacturing.

“On the contrary, it now looks almost certain that industrial production declined in the second quarter overall, contributing to a sharp slowdown in German GDP (gross domestic product) growth, if not an outright contraction,” Kenningham said.

Data released on Friday showed a 2.2% drop in German industrial orders, far exceeding expectations. 

The German economy has been expanding for ten consecutive years and returned to growth between January and March with a 0.4% expansion. The Bundesbank, however, has predicted a small contraction in the second quarter of 2019. 

Alexander Krueger at Bankhaus Lampe said: "As other economic indicators have also disappointed, the prospect of a decline in economic performance is increasing. Growth forecasts are likely to be further reduced.”

A survey by Munich-based Ifo institute published last week provided a further sign that the economic slowdown in Germany has started to be felt and showed that manufacturers in the country are expecting to make more use of the "Kurzarbeit" legislation - a short-hours facility aimed at avoiding mass lay-offs.

Various other global factors including the US-China trade war, Brexit, and a general cooling of the world economy are adding to the economic woes for a country which has relied on exports for growth for many years.

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