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EURONOMICS: Exports Fall, But German Sentiment Rebounds

Published: 09 Dec 2008 18:49:10 PST

LONDON --European exporters are struggling to win business as the global economy slows, even when they are the beneficiaries of a weakening currency.

Figures released Tuesday showed exports fell in Germany, France and the U.K., the continent's three largest economies, during October.

In the U.K. and France, that led to a widening of the trade deficit, which will act as a drag on growth in the fourth quarter. In Germany, however, imports declined more rapidly than exports, leading to an increase in the trade surplus.

But despite signs of weakness in the key driver of growth in Europe's largest economy, sentiment among German financial analysts and institutional investors edged higher in December against expectations, as concern about a prolonged recession eased.

The ZEW measure of expectations rose to -45.2 in December from -53.5 in November, although the measure reflecting the assessment of the current situation worsened sharply to -64.5 points in December from -50.4 in November.

The decline in exports underlines the global nature of the problems facing Europe's major economies. The U.K., French and German governments have all announced fiscal stimulus packages aimed at boosting domestic demand, while central banks have been cutting interest rates aggressively.

But even if they succeed in stabilizing spending in their own economies, developments elsewhere will continue to act as a drag on growth.

"The data on exports is interesting because it shows that the spreading recession through Europe and globally is having negative effects on countries that share trading links," said Matthew Sharratt, economist for Bank of America. "As economic activity slows down it effects each country's ability to export its goods."

The decline in exports wasn't uniform. In France, sales of goods to the rest of the world fell by 6.7% from September, while in the U.K., exports fell by 3.5%, and in Germany exports fell by a more modest 0.5%.

U.K. exports declined despite the pound's rapid decline in value against other major currencies. Against the euro, it has fallen to an all time low of GBP0.8737 Monday from an average of GBP0.80 in mid-July.

"Slowing global growth outweighed the beneficial impact of the weaker pound," said Howard Archer, chief U.K. and European economist for IHS Global Insight.

And similarly, the weakening of the euro against the dollar has had little positive impact for exporters from the euro-zone despite the euro's fall from an all time high of $1.6040 on July 15 to $1.28 Tuesday.

"The near term outlook is not good," said Jennifer McKeown, economist for Capital Economics. "Generally across all the major economies things look as though they will get worse before they get better."

(Emese Bartha and Roman Kessler in Frankfurt and Geraldine Amiel in Paris contributed to this article)

-By Ilona Billington, Dow Jones Newswires, 44 207 842 9452,

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