German trade slowdown raises cooling economy concerns

Trade activity in the largest European economy significantly shrank in July, according to Germany's Federal Statistical Office.

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German economy slows on weak investment in construction

Exports showed their biggest decrease in seven years, down by ten percent against the same period a year ago, while imports dropped 6.5 percent.

Both exports and imports were much lower than expected. In the month, exports shrank by 2.6 percent to €97.1 billion against a projected growth of 0.4 percent. Imports fell by 0.7 percent to €77.7 billion with experts expecting a 0.5 percent increase.

Earlier this week, the German Economy Ministry reported a sharp decline in industrial output in the first summer month. Production in industry excluding energy and construction dropped 2.3 percent, while the production of capital goods saw the largest drop of 3.6 percent.

However, energy output increased 2.6 percent in July while construction grew 1.8 percent.

June's overall growth of 0.8 percent, however, was revised upward to 1.1 percent.

“Even if industrial production data in the summer months is often subject to later revisions, the sharp drop will feed worries about a further cooling of the German economy,” said economist Carsten Brzeski at Dutch multinational banking and financial corporation ING.

The decline in German industrial production is mainly caused by Britain’s vote to quit the EU, according to Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

In the second quarter, the country’s GDP expanded 0.4 percent, a slowdown from the 0.7 percent growth fixed in the first three months of the year.

The latest PMI survey revealed that private sector output fell to a 15-month low last month, though it remained in growth.

Carsten Brzeski added that “a further cooling of the economy in the months ahead should give more support to just-started discussions about fiscal stimulus.”