German foreign trade figures for June fell well short of expectations. The Federal Office of Foreign Affairs reported a 3.4 percent decline in exports compared to the previous month, a much larger decline than analysts had expected, with exports falling by just 1.5 percent.
This unexpected contraction in exports is mainly explained by a weakening of demand from the United States, Germany’s largest trading partner. Several factors could be at the origin of this drop in American demand, such as the slowdown in economic activity, the tightening of monetary policies or even a certain saturation of markets.
The consequences of this development are multiple and could weigh on German economic growth. A drop in exports means a decrease in revenues for exporting companies, which could lead them to reduce their investments and hiring. In addition, a weakening of external demand could lead to a deterioration in the German trade balance and weaken the single currency.
