German exports fall unexpectedly, industrial production rises

German exports unexpectedly fell while industrial output ticked up in November, official data showed on Friday, highlighting both the challenges Europe's biggest economy faces globally and moderate improvement at home.

German exports fell by 2.5% in November compared with the previous month, dragged down by declines in shipments to other European Union countries and the U.S., according to the federal statistics office.

Analysts polled by Reuters had expected no change.

SPUTTERING EXPORT ENGINE 

"This once again underscores how much this former growth engine of the German economy has begun to sputter," Deutsche Bank Research economist Marc Schattenberg said.

On the flip side, industrial production rose 0.8% in November, marking its third consecutive monthly increase against expectations of a 0.4% drop.

"The prolonged downturn appears to have come to an end, a view also supported by the latest noticeable rise in incoming orders," Schattenberg said.

German industrial orders climbed 5.6% on the previous month in November, driven by large-scale orders, data showed on Thursday.

While economists welcomed such signs of German industry stabilizing, doubts remained whether the recovery would last, given tougher trading conditions created by U.S. tariff policies under President Donald Trump.

German exports to the U.S. and EU countries both dropped by 4.2% on the month, while overall non-EU exports declined by 0.2%.

Compared with November 2024, exports to the U.S. fell 22.9% on a calendar- and seasonally-adjusted basis.

"The relationship with our most important export market, the U.S., also remains problematic in the new year," said Volker Treier, head of foreign trade at the German Chamber of Commerce DIHK. "It is only scant consolation that China is once again taking over the role of our most important trading partner."

While a 15% tariff on most EU goods agreed with the Trump administration in July weighed on exports to the U.S., Washington's tariffs on imports from China boosted shipments of Chinese goods to Europe.

Friday's data showed German exports to China increased by 3.4% on the month, while imports rose 8.0% in November.

With overall imports up 0.8% on a calendar- and seasonally-adjusted basis, Germany's trade surplus narrowed to 13.1 billion euros ($15.26 billion) in November from 17.2 billion euros in October and 20.0 billion euros in November 2024.

Franziska Palmas, senior Europe economist at Capital Economics, expressed scepticism if an improvement in German industry conditions seen around the turn of the year could last given the trade backdrop.

"Given the significant structural headwinds facing the sector, we doubt this is the start of a sustained recovery and still expect German industrial output to decline in the medium term," Palmas said.

($1 = 0.8585 euros)