Wile E. Coyote and the German exporters
Surging exports helped the German economy race along at a record pace in the second quarter but the speed machine may be about to run out of road.
Germany’s 2.2-percent export-led surge in the April-June period helped the euro zone grow by 1.0 percent in the same three months. But risks of a downturn in markets like the United States and China mean the trade-driven upswing could falter.
“The euro zone looks generally okay but it may be Wile E. Coyote that just ran off a cliff and hasn’t any ground under it, in terms of who is going to buy its exports,” said AndrewBosomworth, a senior portfolio manager at Pimco in Munich.
Germany’s Federal Statistics Office said there was a “dynamic trend” in foreign trade in the second quarter which, together with investment, made the strongest contribution to growth. German exports rose by 3.8 percent on the month in June, outpacing a 1.9-percent increase in imports.
Leading German companies are enjoying the moment.
ThyssenKrupp, Germany’s biggest steelmaker, shrugged off high input prices nd the threat of Chinese competition, raising its profit target on Friday as brisk growth in its home market helped results smash estimates.
“When you look at the automobile production in Germany, especially by exports, that is definitely something which helped the business,” said ThyssenKrupp Chief Financial Officer Alan Hippe.
But how long can the dynamic trend last? Much depends on the fate of Germany’s export markets and they appear headed for a slowdown at best — or a dip at worst.
Reuters polls of over 600 economists released last month pointed to a cooling of the world economy in the coming months as powerhouses China and the United States gear down and governments attempt to dam rivers of red ink.
Watch out for the cliff edge…