German economy comes off the boil

In January, German companies shipped goods and services abroad to the tune of €111 billion ($136.7 billion) — 0.5 percent less than in the previous month and missing expectations in a FactSet poll of a rise of 0.75 percent. Imports also slipped 0.5 percent month-on-month to €89.7 billion, meaning Germany's trade surplus held steady at €21.3 billion.

Read more: Germany posts record exports and imports for 2017

The latest trade figures released by the German Federal Statistics Office, Destatis, on Friday come a day after another slew of data showed that new industrial orders dropped 3.9 percent in January, significantly worse than the 1.6 percent decline that had been expected by economists.

In addition, German industrial output fell unexpectedly for the second month in a row in January, adding to signs that Europe's largest economy started the year on a weak footing.

No reason to worry

Analysts said the data did not signal a structural slowdown but was largely seasonal. Economic activity in Germany typically slows down in the winter months because of extended holidays.

"The weak start to the new year is nothing new for the German economy," Carsten Brzeski of ING Diba said in a note to clients. "It is a phenomenon witnessed more often in recent years that German economic data has been overly sensitive to seasonal effects and vacation planning."

Unusually warm weather in January resulted in activity in the energy sector falling by 3.3 percent. Construction sank by 2.2 percent, a breakdown of the output data showed. Manufacturing output was hampered by workers' strikes, the Destatis data showed.

But Stephen Brown, analyst with Capital Economics, believes production rebounded in February, as new data will show. "After all, unseasonably cold weather [in February] will have boosted energy output and, more generally, the business surveys paint a positive picture of underlying conditions," he said in a note.

Uncertainty looming large

Generally, the prospects for the German economy look rosy, with capacity utilization at its highest level since 2008 and companies reporting full order books.

Read more: Germany logs biggest growth in 6 years

However, ING's Carsten Brzeski sees "darker clouds" appearing on the horizon as US President Donald Trump seems determined to push ahead with his "America first" policy.including greater trade protectionism.

"New protectionism would definitely hurt the self-proclaimed export world champion and the Italian elections could slow down current europhobia," he said, adding that for the near term there was "plenty of evidence the German economy will power ahead."

uhe/mm (Reuters, AFP, dpa)