Struggling German economy gets ‘ray of hope’ as exports jump

German exports jumped at the beginning of the year, a sign that the industrial weakness that’s weighed on Europe’s biggest economy might be easing. 

Sales abroad rose 6.3% in January from the previous month, far exceeding all estimate in a Bloomberg survey. Imports also increased more than expected, though the trade surplus still widened to €27.5 billion ($30 billion) — a likely record. 

One reason for the resurgence was exports to China, which grew almost 8%. Deutsche Bank economist Robin Winkler said this was a “specific ray of hope.” 

“Despite all the gloom, Germany’s foreign trade is off to a strong start in 2024,” he said. 

If the trend continues, it could ease concerns that Germany is in the midst of a recession caused by hesitant consumers and weak foreign demand. Economic output shrank 0.3% in the final three months of 2023 and the Kiel Institute for the World Economy on Wednesday predicted another slight contraction in the first quarter. 

Bloomberg Economics is similarly gloomy. Earlier this week it cut its forecast for 2024 growth to just 0.2%, down from a prior prediction of 0.4% and said that weak global demand is likely to continue to weigh on trade.

The Ifo Institute also reduced its 2024 projection to 0.2% on Wednesday – from 0.7% in January. For next year, however, it increased its estimate by 0.2 percentage points to 1.5%.

“With the gradual easing of interest rate and price burdens and the effects of higher purchasing power for consumers, economic output will accelerate toward the middle of the year,” said Timo Wollmershaeuser, head of economic research at Ifo.

But for the moment problems dominate. “Consumer restraint, high interest rates and price increases, the government’s austerity measures and the weak global economy are currently dampening the economy in Germany and are once again leading to a winter recession,” he said.