German exporters hit by €70 billion price squeeze

According to surveys and calculations made by the Association, German companies increased the prices of their exported goods by 14.7% in the first half of the year, but producer and import prices rose around twice as fast.

“The resulting burden on German foreign trade amounts to 70 billion euros for the first six months alone,” Volker Treier, head of foreign trade at DIHK, told Reuters.

“Germany’s foreign trade is under extreme price pressure, from which it will not be able to break free in the coming months,” Treier said, as companies only pass on part of their higher costs to foreign customers. .

One problem is the weakness of the euro, which has fallen below parity with the dollar and fallen to its lowest level in two decades, often making imported goods more expensive.

Despite Russia’s invasion of Ukraine, supply shortages and coronavirus shutdowns in China, German exports actually rose 13% in the first half.

But according to the calculations of the DIHK, corrected for inflation, the real values ​​are negative: exports fell by 1.5%.

“This means that German foreign trade is already in a recessionary phase,” Treier said.

According to the latest DIHK business survey, businesses in major export sectors are particularly under pressure. For example, 17% of automakers say they won’t pass cost increases on to their customers, and 35% of pharmaceutical companies won’t either.

“Currently, there is no indication that this tense situation will be resolved quickly,” Treier said, adding that some companies also fear weaker demand in key markets China and the United States.

($1 = 1.0085 euros)

(Editing by Matthias Williams and Bernadette Baum)

By Rene Wagner

James R. Rhodes