Last week’s German trade data revealed a sharp drop in exports, suggesting that the economy’s export engine is not performing particularly well. Much attention has focused on the deteriorating outlook for China, which has dented earlier hopes that German exporters might diversify into stronger emerging markets to make up for weak demand elsewhere in the euro-zone. In fact, as China is the destination for only around 6% of German exports, developments there do not make a radical difference to Germany’s near to medium-term prospects. But the bleak outlook for the other euro-zone economies, which are easily Germany’s most important trading partners, suggests that the export recovery will be very modest.
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