Industry in Germany and France stumbles on China's troubles

By Michael Nienaber and Leigh Thomas

BERLIN/PARIS (Reuters) - German imports grew faster than exports in November and French factory production slowed more than expected, suggesting a slowdown in emerging markets is complicating economic recovery in the euro zone.

The German trade data also pointed to a shift in Europe's biggest economy away from a reliance on exports and toward more consumer-driven growth as demand from China and Russia wanes.

Seasonally adjusted exports rose 0.4 percent in November, undershooting expectations in a Reuters poll of a 0.7 percent increase. Imports grew by a stronger-than expected 1.6 percent, narrowing the trade surplus to 19.7 billion euros ($21.4 billion), data from the Federal Statistics Office showed.

As demand from other emerging markets wanes, the German government expects imports to rise at a faster rate than exports throughout 2016.

This means net foreign trade is likely to hinder growth, a remarkable development for an economy that for decades has relied on exports, led by its engineering and auto sectors.

Record-low borrowing costs, rising demand for property and higher state spending to house an unprecedented influx of refugees have led to a construction boom in Germany. In 2015, the authorities registered over 1 million new arrivals.

Further boosting consumer purchasing power, collectively agreed wages last year rose by 2.4 percent in real terms, the strongest pace since at least 15 years, the WSI economic institute said on Friday.

Economic data on Thursday also showed that healthy domestic demand fueled a bigger-than-expected rise in German industrial orders in November.

Other euro zone countries and the International Monetary Fund have often suggested that the bloc would benefit from major exporter Germany putting more emphasis on consumer-driven growth, hoping this would pull in imports from its partners.

However, trade trends in Germany do not provide firm evidence, at least at this point, that such a rebalancing in the euro zone is under way, analysts said.

CONSUMPTION STORY

Bankhaus Lampe chief economist Alexander Krueger said industrial production was floppy due mainly to slowing global growth, particularly in China and other emerging markets.

Martin Wansleben, managing director of the DIHK chambers of commerce, told Reuters that China's weaker growth rate was impairing export prospects, but this would not throw the German economy as into a recession.

In France, industrial production fell 0.9 percent in November on the month, also falling short of expectations, figures from statistics agency showed on Friday.

However, the French trade deficit narrowed in November to 4.63 billion euros.

German industrial output fell by 0.3 percent as manufacturing activity dropped, but construction pushed up, data from the Economy Ministry showed. The headline figure came in weaker than a consensus forecast for a 0.5 percent increase.

The ministry said the economic slowdown in emerging markets was the main reason why industrial companies held off some production in the fourth quarter of 2015.

However, a recent rise in industrial orders and a revival in construction pointed to a recovery in the sector in the coming months, the ministry added.

Strong private consumption and higher state spending on refugees are expected to drive growth. The government predicts gross domestic product will expand by 1.7 percent in 2015 and 1.8 percent in 2016.

The Federal Statistics Office will publish its flash reading for 2015 GDP growth on Jan. 14.

Finance Minister Wolfgang Schaeuble has signaled readiness to loosen his austerity policy, but he still aims to balance the federal budget in 2016, despite the cost of accommodating and integrating hundreds of thousands of migrants. Analysts say that might be difficult if the influx does not slow down.

($1 = 0.9200 euros)

(Reporting by Michael Nienaber; Additional reporting by Gernot Heller, Rene Wagner and Klaus Lauer; Editing by Ruth Pitchford)

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