German exports unexpectedly fall as trade volatility bites

By Maria Martinez

Sept 8 (Reuters) - German exports unexpectedly fell in July, as weaker shipments to European Union countries and China underscored the fragility of a trade-led recovery in Europe's largest economy.

Exports fell by 0.8% in July compared with the previous month, data from the federal statistics office showed on Tuesday. Economists polled by Reuters had expected a 0.1% increase.

Exports to EU countries dropped by 1.6%, while those to non-EU countries increased by 0.2% on the month. Exports to the United States jumped 19.1% on the month after falling 14.2% in June.

"Germany's foreign trade sector is feeling the volatility in trade policy directly," said Volker Treier, head of foreign trade at the German Chambers of Commerce and Industry (DIHK). 

Stronger exports helped the German economy grow by 0.3% in the second quarter but economists warned that conditions remain challenging. 

"The volatile figures show how fragile the economic situation remains. Germany is still a long way from being out of the woods," said Dirk Jandura, president of the BGA German trade association.

Imports dropped by 5.7% on the month, meaning Germany's trade surplus with the rest of the world grew to €21.3 billion ($24.8 billion) in July from €15.4 billion in June. 

Sentiment among exporters has improved considerably, with an Ifo survey of expectations rising in August to the highest level since February 2022, shortly before Russia's invasion of Ukraine. 

"The export industry is picking up speed," said Ifo's Klaus Wohlrabe. 

SHARP CONTRAST WITH CHINESE EXPORT FIGURES

The trade numbers — and separate data from France showing a widening French trade deficit in June — were in sharp contrast to new figures showing a 25% surge in Chinese exports year-on-year in August on the back of high-tech and AI-related products.

German companies are increasingly feeling competitive pressure from Chinese rivals, a DIHK survey showed last week.

German exports to China fell by 9.5% on the month, while imports from China fell 7.5%, statistics office data showed. 

($1 = 0.8598 euros)

(Reporting by Maria Rugamer in Gdansk and Maria Martinez in Berlin; Additional reporting by Rene Wagner; Editing by Ludwig Burger and Catherine Evans)