An ING economist says trade is no longer a “sustainability engine” of the German economy but rather a drag, although it fell less than expected last month amid weaker global demand, DPA and Reuters reported, citing Agerpres.

German exports fell 0.9 percent in July after rising 0.2 percent in June, while analysts had expected a 1.5 percent drop.

Exports to EU countries increased by 0.5%, and to non-EU countries decreased by 2.5%. Exports to the USA and China increased in July by 5.2% and 1.2%, respectively, and to Great Britain decreased by 3.5%.

Imports rose 1.4% in July after falling 3.2% in June, while analysts had expected a 0.5% rise.

As a result, Germany’s trade surplus fell more than forecast to 15.9 billion euros in July from 18.7 billion euros in the previous month, while analysts had expected a surplus of 18 billion euros.

“Trade is no longer a sustainable growth engine of the German economy, but rather a brake. Disruptions in supply chains, a much more fragmented global economy and China’s increased ability to produce goods it used to buy from Germany are all factors that weighed on exports in July,” said ING analyst Carsten Brzeski.

In late July, he said the German economy “appears to be stuck in the twilight zone between stagnation and recession” after government data showed the country’s GDP stagnated at 0%.

Germany’s GDP stagnated in the last quarter

Brzeski is now warning that there is a risk of Germany re-entering recession in the third quarter of 2023. A recession is usually defined as two consecutive quarters of decline. In other words, Germany officially emerged from recession last semester, even though there was no or zero economic growth, which some economists describe as stagnation.

The German economy slipped into recession in the first quarter of the year after another small contraction, as it did in the last quarter of 2022.

On a year-over-year basis, exports fell 0.9% in July after rising 1.7% in June, while imports fell 10.3% after falling 9.3% in June.

“Not only the reduction in global demand creates more and more problems for companies. They are also suffering from the erosion of their competitiveness in global markets,” economist Bastian Hepperle from Hauck Aufhaeuser Lampe Privatbank also states.