Tuesday, October 28, 2003

German Exports Show Strong Growth

This is obviously interesting and significant, even if I'm not sure how to interpret it yet. Clearly Germany is benefiting from economic growth in the EU candidate countries, China and possibly elsewhere in the developing world.

The German economy has for the first time in 11 years recorded the world's fastest export growth, damping fears that the euro's rise could curb export growth. In August German export figures beat US ones by more than 7 per cent. According to the OECD and the International Monetary Fund, German export growth was $65bn higher than the global market export leader, the US. Japan ranked third. The successful turn brings Germany's exporters back to export growth levels in the 1980's which later deteriorated after German reunification.

Germany's export growth upsurge could lead to a re-evaluation of the causes of Germany's economic crisis. The lack of competitiveness of German products abroad has long been seen as the key problem. At the start of the 1990s, Germany's market competitiveness suffered from high wage contracts and the sharp appreciation of the D-Mark after reunification. "Today, we don't have this problem any more," said Harald Jörg, economist at Dresdner Bank. The strong German performance comes as last week the euro climbed to near-record highs against the dollar, triggering fears that the currency's persistent rise could curb German export growth and derail the eurozone's fragile upturn.

The rally, which took the euro briefly above $1.18, came amid mounting concern over the scale of the US current account deficit. The upward trend of German exports in the first half of this year has, however, been strengthened by the surge of the euro. The appreciation of the euro automatically leads to a higher value for European exports in dollar terms. A stronger euro was thought to damp export growth, especially in Germany which slipped into recession in the first half of this year, as the currency surged.

According to experts Germany's comeback can be attributed to favourable cost development since the mid 1990s. "Germany has gained a significant leap through wage restraint," said Mr Jörg. According to Elga Bartsch, analyst at Morgan Stanley, Germany has profited from strong presence on export markets in eastern and central Europe which have grown amid the global upturn since 2001. Fabien Wehnert at the BDI, the German industry federation, said that trade with the new EU member states had risen by about 6 per cent.

Last year Germany was the market leader in machinery exports with 19 per cent global market share before the US with 14.9 per cent followed by Japan with 12.2 per cent."US production suffers from weaker quality while Japan concentrates on mass production. That's why Germany will continue as the leader on the market offering high-quality production," said Olaf Wortmann, at the VDMA, the association of German machinery makers.
Source: Financial Times

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