German exports, industrial production rise more than expected

By Maria Martinez

BERLIN, Aug 7 (Reuters) - German exports and industrial production beat expectations in June, adding to signs that Europe's largest economy gained momentum in the second quarter, though economists warn the upturn may not prove sustainable.

German industrial production rose 0.2% in June from the previous month, the statistics office said, above analysts' expectations for a 0.1% increase in a Reuters poll.

The increase was driven by a 3.6% month-on-month rise in automotive output and an 8.4% jump in other transport equipment production, including aircraft, ships, trains and military vehicles.

Despite higher energy prices and uncertainty linked to the Iran war, German industry has continued to recover modestly. June marked a third consecutive monthly increase, confirming that industrial output rose in the second quarter.

"This does not change the fact that industrial production is moving sideways at a low level," said Marco Wagner, senior economist at Commerzbank. 

The hit to business from low water levels on the Rhine is unlikely to change that over the summer, he added.

REBOUND AHEAD, BUT NOT A STRUCTURAL IMPROVEMENT 

Business surveys, including the manufacturing PMI and Ifo business climate index, improved in July, pointing to continued momentum in manufacturing in the third quarter. German industrial orders rose 3.1% in June, data showed on Thursday.

"However, don't mistake a cyclical rebound for structural improvement," said Carsten Brzeski, global head of macro at ING. 

Brzeski pointed to recent Chinese trade data showing Germany's bilateral trade deficit with China widened in July, "indicating that any cyclical improvement in industry should not obscure the view of German industry's structural problems."

At the start of July, Chancellor Friedrich Merz unveiled a package of pension, tax and labour reforms to boost growth, jobs and competitiveness, aiming to address longer-term structural issues that have held back German growth for years.

But any recovery will likely be slow, Commerzbank's Wagner said. "After all, the government’s planned reforms will do little to improve Germany’s embattled position as a business location."

EXPORTS RISE FOR FIFTH STRAIGHT MONTH 

Exports rose 0.9% in June from the previous month, extending their run of gains to five months, statistics office data showed. The increase beat expectations for a 0.2% rise in a Reuters poll.

Germany exported a record €139.3 billion ($160.5 billion) of goods in June, the data showed. 

Imports rose 4.4% from May on a calendar- and seasonally-adjusted basis.

The trade surplus narrowed to €15.4 billion in June from €19.3 billion in May.

In the first half of 2026, exports rose 3.7% from a year earlier, while imports increased 4.4%.

"Export growth in the first half of the year is a ray of hope for the economy. However, it is too early to breathe a sigh of relief: the outlook for global trade remains bleak," said Volker Treier, head of trade at the German Chamber of Commerce (DIHK). 

Calendar- and seasonally-adjusted exports to EU countries rose 1.3% in June from the previous month, while exports to countries outside the bloc increased 0.3%.

Exports to the U.S. fell 14.2% on the month as President Donald Trump's tariff and other policies continue to create uncertainty for German exporters. 

Against that backdrop, the DIHK called on the EU to strike additional trade agreements with countries such as Thailand, Malaysia and the Philippines to help companies diversify supply chains and expand into new markets.

($1 = 0.8681 euros)

(Reporting by Anastasiia Kozlova and Paolo Laudani in Gdansk, Maria Martinez in Berlin. Editing by Ludwig Burger and Mark Potter)