German economic engine stalls

Most analysts believe Germany's economic weak spell will prove short-lived and that recovery will regain momentum in coming months.

The German economic engine, one of the drivers of recovery in the 17-country eurozone, appears to be stalling, with industrial output declining and exports nearly grinding to a halt, data shows.

But most analysts believe the current weak spell will be short-lived and that recovery will regain momentum in coming months.

Amid criticism that Germany was not doing enough to help pull its eurozone partners out of the economic doldrums, trade data on Monday showed that German imports from the single currency area grew by 3.4 per cent in October, while its exports to that region slipped by 0.1 per cent.

Germany has come under increasing fire for its persistently high trade surplus recently, with critics arguing that its economic robustness came at the expense of the eurozone's weaker members.

But overall, the German trade surplus contracted in October, as imports grew faster than exports, federal statistics office Destatis calculated.

In seasonally adjusted terms, Germany exported goods worth 92.9 billion euros ($127 billion) in October, up from 92.7 billion euros in September, Destatis said in a statement.

Imports rose by a much stronger 2.8 per cent to 76.1 billion euros.

That meant the seasonally adjusted trade surplus - the balance between imports and exports - declined to 16.8 billion euros in October from 18.7 billion euros in September.

Natixis economist Johannes Gareis said the October data would "ease the pressure on the German locomotive to do more to help rebalancing the eurozone".

Industrial output shrank by 1.2 per cent in October, the economy ministry calculated in preliminary data.

That suggests "the country's main growth engine has not only stalled, but gone into reverse", Capital Economics economist Jonathan Loynes said.

"Overall, the numbers put another dent in hopes that Germany will drive a further recovery in the eurozone as a whole and maintain the pressure on the European Central Bank to do more to boost growth across the currency union," Loynes said.

But Berenberg Bank economist Christian Schulz was more optimistic.

"In November, survey indicators rebounded sharply as tax hikes did not materialise, suggesting that the softness was temporary and that Germany is headed for trend output growth rates in the fourth quarter."


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Source: AAP


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