BERLIN German exports had their biggest fall since late 2009 in May while imports rose far more than expected, in a sign that Europe's largest economy is struggling to sell its goods abroad though domestic demand is strong.
Seasonally-adjusted exports tumbled 2.4 percent, data from the Federal Statistics Office showed, falling further than the consensus forecast in a Reuters poll for a 0.4 percent drop and undershooting even the lowest estimate for a 1.2 percent fall.
Shipments abroad, traditionally the backbone of the German economy, are suffering this year as the euro zone crisis eats away at demand in Europe, Germany's largest export market, while a slowdown in China reduces appetite in the country many German firms had looked to as an alternative.
"German exports dropped sharply in May, illustrating that the economy still has difficulties to shift into a higher gear," said Carsten Brzeski, senior economist at ING, adding that this was due to calendar effects and weaker demand from China.
A breakdown of unadjusted data showed exports to the euro zone, where Germany sends 40 percent of its shipments, fell by 9.6 percent in May compared to the same period last year, while exports to countries outside of Europe slipped by 1.6 percent.
While the trade data is backward-looking, a purchasing managers' survey published last week suggested that the export situation had not improved by June, when bookings from abroad, especially Asia and elsewhere in Europe, dropped in the manufacturing sector for a fourth straight month.
The government expects exports to be a drag on gross domestic product (GDP) this year and is instead relying on private consumption, helped by higher wages, a robust labour market and moderate inflation, to support growth.
A 1.7 percent increase in imports will therefore be welcome news for the government as it shows Germans are buying more goods from abroad.
"The strength in imports shows domestic demand is robust, which is good for German growth because consumption and investment could make positive contributions to GDP," said Christian Schulz at Berenberg Bank.
The rise in imports, which overshot even the highest estimate in a Reuters poll for a 1.2 percent increase, also offers hope to struggling euro zone states seeking to export their way out of their downturns.
The German economy was a bastion of strength during the early years of the euro zone crisis but it weakened last year and is now struggling to overcome a contraction in late 2012 and a subdued start to 2013, when it only just avoided a recession thanks to private consumption.
Recent data from Europe's economic powerhouse has been mixed, with sentiment surveys improving, the private sector expanding, joblessness falling and retail sales rising, though industrial orders have dropped.
The seasonally-adjusted trade surplus narrowed to 14.1 billion euros from a downwardly revised 17.5 billion in April. The consensus forecast was for it to fall to 17.5 billion euros.
The German economy is still outperforming peers within the euro zone. Data last week showed France's trade deficit with the rest of the world widened sharply in May.
(Reporting by Michelle Martin; Editing by Stephen Brown)