German exports dive; Bundesbank slashes forecast

Germany's resilience to the debt crisis engulfing its neighbours looked to be disintegrating after data showed exports posted their biggest fall in half a year in October, and the Bundesbank forecast a lean winter and feeble growth next year.
With many euro zone members in danger of sliding into recession by the end of the year, a monthly economy ministry report said Germany's own momentum would slow in the fourth quarter and that weakness in manufacturing and construction had spread to the service industry.
The Bundesbank slashed its 2012 growth forecast to 0.6 percent, a third of the 1.8 perecent growth it had predicted six months ago and below a government forecast of 1 percent. "The crisis in public finances in a number of euro-area countries, the ensuing uncertainty and general economic slowdown are increasingly placing a strain on economic activity in Germany," the German central bank said. With a robust expansion of 3 percent this year, Europe's biggest economy has been one of the few glimmers of hope as the debt crisis adds to gloom across the euro zone.
The Bundesbank said it saw "considerable downside risks" due to the debt crisis. EU leaders, minus Britain, on Friday agreed to pursue tighter integration with stricter budget rules for the single currency area at a summit overnight, but markets expressed doubts that a comprehensive solution to two years of turmoil had been reached.
Even if policymakers can find a way of quelling the immediate problems, many euro zone states will face years of austerity and low growth, depriving Germany of key foreign demand for its exports and leaving it dependant on emerging markets and its notoriously cautious consumers for growth momentum. Data showed exports fell by 3.6 percent on the month in October - their biggest fall since April - pushing the trade surplus sharply lower. Analysts had forecast a more modest drop of just 1 percent according to a Reuters poll.
Imports also shrank by their biggest amount in six months, dipping 1.0 percent compared with an expected 0.5 percent rise. "We are seeing the beginning of a strong hit to German exports," said Berenberg Bank's Holger Schmieding. The head of Germany's exporters' association (BDA), Anton Boerner, said late last month the euro zone debt crisis was like a "sword of Damocles" hanging over the real economy. He urged leaders to break the cycle of fear and uncertainty with clear decisions and commitments. Unadjusted trade data showed exports to euro zone countries dipping 0.4 percent in October compared to the previous year, a much weaker performance than to countries outside the currency bloc. Exports to countries outside the EU pushed up by 8.3 percent.