German exports stuttering

German exports fell in May which has meant that the trade surplus of Europe zone’s largest economy has fallen to a significantly lower level than was expected, following data from the Federal Statistics Office which is a further sign that the strength of the German economy is fading.

Sales have fallen by 3.2 percent from April and it is the biggest drop since June 2004 and France has shown a similar fall.

As both Germany and France account for nearly half the euro zone’s economic output, the fall in exports reveals a bleak situation.

It also follows a continued slowdown in other euro-zone countries and the pressure from a increasingly strong euro and accelerating inflation is making the situation tougher.

German exporters are struggling with the euro’s 15 percent appreciation against the dollar and an 18 percent gain against sterling which has meant that German products are far less competitive than those from the US, although the US economic slowdown is now global and with record oil prices, the world economy is cooling.

In the meantime, the European Central Bank has raised interest rates to 4.25 percent which is the highest level in nearly seven years in order to help get record euro zone inflation under greater control and help to stabilise rising prices.

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