BERLIN German exports fell unexpectedly in July, posting their steepest drop in nearly a year, while imports also edged down, suggesting Europe's biggest economy started the third quarter on a weak footing after Britain's vote to leave the European Union.
The trade figures, published on Friday by the Federal Statistics Office, followed economic data that painted a gloomy picture for German manufacturing, with industrial orders barely rising in July and output falling the most in nearly two years.
"The month of July was clearly not a good month for Germany," ING economist Carsten Brzeski said, adding that the surprisingly weak trade figures added to growth concerns.
"A further cooling of the economy in the months ahead should give more support to just-started discussions about fiscal stimulus," Brzeski said.
Seasonally adjusted exports fell 2.6 percent on the month, the data from the Federal Statistics Office showed. This was the biggest monthly drop since August 2015 and undershot the Reuters consensus forecast of a 0.25 percent increase.
Seasonally adjusted imports fell 0.7 percent on the month. This was also weaker than the forecast of economists polled by Reuters who had predicted a 0.8 percent rise.
The surprise fall in exports narrowed the seasonally adjusted trade surplus to 19.4 billion euros ($21.9 billion) from a downwardly revised 21.4 billion euros in June. This was below the Reuters consensus forecast of 22.0 billion euros.
Commerzbank economist Ralph Solveen said the drop in exports mainly reflected factors such as more holidays falling in July.
"However, exports certainly won't be the driver of the German economy in the coming months," Solveen said. "There is the sluggish global economy and the effects from the weaker euro are also fading."
A breakdown of unadjusted trade figures showed that demand for German goods from countries outside the EU dropped the most, with exports to so-called third countries, which includes China, Russia, Japan and the United States, plunging by 13.8 percent.
German exports to EU countries outside the euro zone, which includes Britain, dropped by 8.8 percent.
The government expects domestic demand to be the sole driver of economic growth this year, with an estimated expansion rate of 1.7 percent in 2016. For 2017, it predicts an economic slowdown to 1.5 percent.
The DIW institute gave a more pessimistic outlook on Thursday, predicting German economic growth to nearly halve in 2017 as Brexit and other risks hit exporters.
($1 = 0.8867 euros)
(Editing by Catherine Evans)