German exports surprisingly rise in January driven by China trade

Germany’s foreign sales saw an unexpected rise in January, buoyed by robust trade with China with manufacturers in Europe's largest economy starting the year on a positive note.

Seasonally adjusted exports increased 1.4% on the month after an upwardly revised increase of 0.4% in December, the Federal Statistics Office said on Tuesday. Imports fell 4.7% after showing no change in the prior month, an upward revision.

A Reuters poll had pointed to a 1.2% drop in exports and a 0.5% fall in imports. January's 1.4% increase in exports far surpassed even the most optimistic forecast.

The trade surplus grew to 22.2 billion euros ($26.42 billion). In the year, exports to China rose by 3.1%. Exports to other European Union countries fell 6.0% on the year, those to the United Kingdom dropped 29% and those to the United States decreased by 6.2%.

Thomas Gitzel, chief economist at VP Bank, described the overall rise in exports as "an extremely positive surprise" and expected further growth.

"Net exports will thus be able to partially offset losses in private consumption in the economy as a whole - but not completely. On balance, the German economy will shrink in the first quarter," he said.

Most economists expect the economy to shrink in the first three months of the year, before rebounding in the second.

On Monday, official data showed industrial output fell in January as winter weather slowed construction and semiconductor shortages held back production in the car industry.

However, German automotive parts maker Continental AG said earlier on Tuesday it expected 2021 sales and profit margin to grow despite expected additional costs due to chip shortages.

Recent German data has painted a picture of a two-speed economy in which export-oriented manufacturers are doing well while domestically driven services are suffering under lockdown measures imposed in early November and tightened in mid-December to contain a second wave of coronavirus infections.