Economy's sustained growth will buttress U.S. exports - Germany - World Trade Outlook

Business America, April 10, 1989 by Velizar Stanoyevitch, Brenda Fisher

Prospects for U.S. exports are very favorable, given the present competitive exchange rates and forecasted growth in domestic demand in Germany. U.S. exports to Germany rose to $14.3 billion in 1988-a 22 percent increase over the previous year-led by increased exports of office machines, EDP equipment, aircraft, industrial raw materials, and chemicals.

Germany's real growth last year of 3.4 percent was the strongest in more than a decade, continuing a growth pattern started in 1982. Although the economy is expected to slow to a 2 to 2.5 percent growth rate this year, the German market should prove increasingly receptive to American-made products and services. With investment spending continuing at a healthy pace, opportunities for sales of U.S. manufactured goods and capital equipment remain particularly favorable.

Germany's overall trade surplus in 1988 reached a record $73 billion, but its bilateral surplus with the United States of $12.2 billion was down from $15.3 billion in 1987. German imports this year are expected to grow by 8 percent, up slightly over 1988. If this proves correct, Germany's import growth-rate could exceed the country's export growth rate for the first time in many years.

Germany's $1.2 trillion GNP economy, traditionally export-driven, is beginning to draw some strength from domestic investment in plant and equipment and consumer spending. The inflation rate is generally expected to increase from 1.2 percent in 1988 to 2.5 percent this year. Unemployment averaged 8.7 percent last year and is likely to rise somewhat, partly because of the influx of German nationals from Eastern Europe. With capacity utilization at more than 88 percent, capital investment for expanding-as well as rationalizing-production is expected to rise. nearly 7 percent this year. As a result of income tax reductions, consumer spending should increase more than 4 percent this year.

High-technology products offer the best export potential for U.S. companies. The following industry sectors provide excellent opportunities: security and safety equipment, biotechnology, analytical and scientific instrumentation, computer hardware and software (including CAD/CAM), electronics, medical equipment and health care services, industrial process controls, environmental/pollution control equipment, telecommunications equipment, and selected seafoods. In each of these sectors, U.S. products enjoy an excellent reputation and hold a significant share of the German market.

U.S. companies wishing to expand sales to Germany are encouraged to use the services of the Department of Commerce, particularly participation in trade fairs, which afford an excellent means for introducing new or technologically advanced products. A Matchmaker delegation will attend the April Hanover Industry Fair. The Department will also participate in major German trade fairs promoting sporting goods, apparel, security equipment, biotechnology, medical equipment, software, hardware and data communications equipment, electronics, and scientific instrumentation.

"New-to-Europe" exporters should definitely consider the formation of the EC single internal market in 1992. The creation of an integrated European market, including a common set of standards, will influence greatly the approach of American firms to the market. U.S. firms should carefully review their marketing efforts in Germany and elsewhere in Europe to take early advantage of the EC program.

For information, contact the Germany desk officer at (202) 377-2434/5.