Germany’s export companies will feel the effects of subdued global trade in 2023. The demand for “Made in Germany” is weakening. According to economists, the headwind is likely to continue for the time being.
The German export engine sputtered last year. According to preliminary data from the Federal Statistical Office, the value of goods exports fell by 1.4 percent to 1,562.1 billion euros compared to the previous year’s record value.
“After the financial crisis in 2009 and the Corona crisis in 2020, it is the weakest result in three decades,” said Carolin Herwig, foreign trade expert at the German Chamber of Commerce and Industry (DIHK), with a view to the severity of the decline. Low demand from abroad due to high inflation rates and high interest rates as well as geopolitical risks caused the loss. “2023 was a used year for the German export industry.” Economists initially expect persistent headwinds.
According to the Federal Association of Wholesale, Foreign Trade and Services (BGA), crises dampened world trade last year. “It is particularly noticeable that the unrest on the world markets has affected German exports,” said BGA President Dirk Jandura. “German exports to the key sales markets stagnated or even decreased in 2023 compared to the previous year.”
In 2022, exports “Made in Germany” reached a record level, also as a result of price increases. However, the price effects cannot be quantified precisely because statisticians do not collect price-adjusted data on foreign trade.
Imports fell even more significantly
Imports to Germany fell significantly more than exports last year: after calendar and seasonally adjusted imports, at 1,352.5 billion euros, were 9.7 percent below the previous year’s value. This results in an increased export surplus of 209.6 billion euros. The year before, the balance was significantly lower at 85.5 billion euros. Europe’s largest economy has been exporting more than it imports for years. This has caused anger in other countries in the past.
The significant decline in imports shows that private domestic consumption is very weak, explained VP Bank chief economist Thomas Gitzel. “At the same time, it also shows that the industry ordered few goods from abroad because the order books are thin.” From one perspective, the order intake tends to suggest a further decline in exports in the coming months. “If no orders come in, on the other hand no goods can be exported.” Economist Marc Schattenberg from Deutsche Bank also initially expects further headwinds for the German export industry.
Unexpectedly strong setback at the end of the year
At the end of 2023, German foreign trade suffered an unexpectedly strong setback. Exports fell 4.6 percent month-on-month in December. This is the sharpest decline since the end of 2022. Analysts had expected exports to shrink, but on average they had only expected a decline of 2.8 percent. Goods worth 125.3 billion euros were delivered abroad. That was also 4.6 percent less than in December 2022. Imports fell by 12.4 percent to 103.1 billion euros compared to the same month last year.
The mood in the German export industry had recently deteriorated. Ifo export expectations fell to minus 8.4 points in January, from minus 7.1 points in December. “The German export industry is starting the new year worse,” says Klaus Wohlrabe, head of the Ifo surveys. “The exporters need new impulses.”
A majority of industries therefore expect their exports to decline. This particularly includes the core sectors of industry, such as automotive engineering, mechanical engineering and electrical engineering. Manufacturers of plastic and rubber goods and the metal industry are also reporting declining orders from abroad.
Source: Stern
