German exports struggle to recover in uncertain global market

By Joseph Nasr

BERLIN (Reuters) - German exports rebounded by less than expected in October, dampening hopes that trade will make a significant contribution to a predicted expansion in Europe's biggest economy in the final quarter of this year.

The data suggests that German industry, whose output rose less than expected in October due to stagnating factory output, will only witness a mild recovery in the last three months of this year.

Exports have almost stagnated over the last 12 months, growing on average by 0.1 percent monthly from a historical average of 0.3 percent.

"Looking ahead, however, the latest weakness of the pound sterling and possible protectionist policies under the new president in the U.S. do not bode well for the outlook for German exports," said ING economist Carsten Brzeski.

Seasonally adjusted exports rose by 0.5 percent on the month, data from the Federal Statistics Office showed, while imports increased by 1.3 percent.

The data reinforces a trend of weakening exports, which have been losing their traditional role as the main growth driver in Germany.

Hours after the data was published, the BGA trade association said it would lower its 2016 growth forecast for exports to a "mini plus" from a previously projected 2 percent.

"The forecast of 2 percent growth is no longer valid," a spokesman for the BGA told Reuters. "We will now go for a mini plus for this year." The spokesman did not give more details.

A Reuters poll had pointed to exports rising by 1.0 percent and imports posting a 0.9 percent increase.

The jump in imports narrowed the seasonally adjusted trade surplus to 20.5 billion euros from 21.1 billion euros in September. The October reading was below the Reuters consensus forecast of 21.5 billion euros.

Exports for September were revised down for a fall of 1.0 percent from a previously reported drop of 0.7 percent.

Private consumption and increased state spending have been fuelling German growth.

But the positive effects of private consumption are likely to wane next year, as rising consumer prices and weaker wage increases are expected to discourage Germans from spending.

(Additional reporting by Klaus Lauer and Rene Wagner; Editing by Paul Carrel/Jeremy Gaunt)