Page last updated at 10:17 GMT, Tuesday, 10 March 2009

Germany's exports down by a fifth

Man works on tyre at German firm Continental
The stronger euro has made it harder to export goods

German export earnings fell by a fifth in January as the world's largest exporter was hit hard by a drop in demand for its goods overseas.

Exports fell by 20.7% compared with a year earlier, while imports fell by 12.9%, official figures showed.

As a result, the country's trade surplus halved to 8.5bn euros (7.8bn).

Separately, French industrial production fell by 3.1% in January compared with December, while manufacturing output fell by 4.1%.

Weak demand

In Germany, exports have traditionally been a bright spot for the economy, but a weak global economy is hurting demand for luxury cars and other German goods.

Exports fell to 66.6bn euros, down from 84bn in January 2008. Imports dropped to 58.1bn euros, down from 66.7bn.

Foreign trade is a clear brake on the economy
Torsten Polleit, Barclays

Exports to EU countries fell 18.7%, while those to the rest of the world fell by 24.5%, according to preliminary figures from the Federal Statistics Office.

"This shows that the economy is being hugely impacted in the first quarter of 2009 by the global recession, especially through foreign trade," said Simon Junker at Commerzbank.

"Foreign trade is a clear brake on the economy in the first quarter," added Torsten Polleit at Barclays. "The bottom level isn't in sight yet."

A drop in exports in the last three months of 2008 contributed to a contraction in the German economy.

Continuing weak demand for exports will see this contraction continue, said Sebastian Wenke at Dekabank, who forecasts a drop in German GDP of 1.5% for the first quarter of this year.

Germany has predicted that its economy will shrink by 2.25% in 2009, which would be its worst performance in the post-World War II era.

The French figures were described as "appalling" by Colin Ellis at Daiwa Securities, a view echoed by Jacques Cailloux at RBS.

"Today's industrial data is as bad as it gets," he said.

"The scale of contraction is worrying. Any hopes of stabilisation in terms of the pace of contraction has been totally dashed."

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