Export nation Germany at risk of losing touch
Published: Thursday, Nov 7th 2024, 12:50
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Weak exports and declining production are putting the German economy in difficult waters in politically turbulent times. Economists comment that Germany is no longer competitive internationally as a foreign trade nation.
Europe's largest economy needs a government capable of acting as quickly as possible following the break-up of the "traffic light" coalition, warned Dirk Jandura, President of the German Wholesale, Foreign Trade and Services Association. This is also in view of the re-election of Donald Trump as US President and the threat of import tariffs in the most important sales market for goods "Made in Germany".
"Germany needs an economic turnaround," says Jandura. "We need to turn the tide before the waves get too high."
Export industry is struggling
After an interim high in August, companies delivered fewer goods abroad again in September. According to preliminary figures from the Federal Statistical Office, exports were 1.7% below the level of August 2024, with a total value of €128.2 billion. There was also a drop of 0.2% compared to September 2023.
Growing competition for German products on the global markets, for example from China, as well as structural problems in German industry, such as the high energy prices in international comparison, have been causing problems for Germany as an export nation for some time now. According to the Wiesbaden-based authority, exports from January to September of the current year, adjusted for calendar and seasonal effects, were 1.0 percent lower than in the same period of the previous year at 1175.5 billion euros.
Meanwhile, imports rose to 111.3 billion euros in September - an increase compared to both the previous month (up 2.1%) and the same month last year (up 1.3%). In the nine-month period from January to September, imports to Germany totaled 988.6 billion euros, 4.2% less than a year ago.
Industrial production falls unexpectedly sharply
Production in German industry is also weakening: from August to September of the current year, total production fell by 2.5%, which is more than market observers had expected. Compared to September 2023, the decline was even 4.6%, according to calculations by the Federal Statistical Office. The statisticians explained the setback primarily with a significant drop in production of 7.8% compared to the previous month in the automotive industry.
The renewed decline in industrial production in September should be seen as a warning signal for a better economic policy. With exports also falling in the same month, there is also no stimulus from abroad for the domestic economy, says Volker Treier, head of foreign trade at the German Chamber of Industry and Commerce, assessing the situation. Trump's re-election and the end of the three-party alliance between the SPD, Greens and FDP are causing further uncertainty.
Trump's second term in office causes concern
"The decline in industrial production and exports is a warning in view of Donald Trump's victory. More US protectionism does not bode well for industry-heavy Germany," predicts Thomas Gitzel, Chief Economist at VP Bank.
During the election campaign, Trump announced that he would introduce high import tariffs to protect the US economy. This would make German-made goods more expensive in the most important sales market for goods "Made in Germany".
In September, the United States was once again the number one destination for German products: Exports to the USA increased by 4.8 percent to a total value of 14.2 billion euros as of August 2024. In contrast, exports to China decreased by 3.7% to 7.1 billion euros, while exports to the United Kingdom fell by 4.9% to 6.4 billion euros.
Economists: Reforms in Germany overdue
Economists are urging domestic politicians to strengthen Germany as an industrial location, for example by reducing bureaucracy. However, the break-up of the traffic light coalition makes rapid decisions less likely, as Commerzbank chief economist Jörg Krämer summarizes: "Germany is facing a difficult winter half-year without a political majority for necessary economic reforms."
©Keystone/SDA
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