German's exports slump in August

Germany's trade surplus (value) narrowed to €15.3bn in August from €25.0bn in July. This comes on the back of exports having dropped at their fastest pace since the 2009 financial crisis (-5.2% m/m), accompanied by a smaller fall in imports (-3.1% m/m). However, on a year-on-year basis, both exports and imports were higher by 5.0% and 4.0%, respectively. 

The breakdown by destination is not available yet, but this is likely to be related to the fall in trade in Asia recorded over the same month. Given the recent spate of poor August data, the latest trade numbers are not such a big surprise and remain consistent with the view that Germany is facing significant headwinds from weakening global demand, says Barclays. 

In recent months, exports to emerging market countries have been waning, particularly those to China and Russia, but exports to other European countries (both within and outside the euro area) have been robust. The decline in imports is more surprising and is at odds with the strength in domestic demand. 

With today's numbers, the carry over shows a contraction of 1.5% for Q3 after the large increase recorded in Q2. This is not assumed to be sufficient to derail German growth, as a weaker contribution from exports should be at least partly offset by stronger domestic demand, added Barclays. However, after the release of other weak data for August (IP, factory orders), risks are clearly tilted to the downside and September's numbers will be scrutinised, especially since this time they will also reflect the potential impact of the VW scandal.