By Geoffrey Smith

Investing.com -- Germany's economic motor misfired at the start of the third quarter, as the loss of cheap Russian energy threw its manufacturing sector into turmoil.

Exports from Europe's largest economy fell by 2.1% in July from June, while June's number was revised down slightly to show a rise of only 4.1%. The performance was still a little better than the 2.3% drop expected ahead of time.

Imports also fell by more than expected, dropping 1.5% overall as Russia turned down the taps on the Nord Stream 1 gas pipeline. Imports from Russia fell 17.4% from June. Russia had been a significant export destination for German goods until the invasion of Ukraine, but fell another 15% in July. Over the first seven months of the year, Russia has accounted for only 1% of German exports.

Analysts have turned increasingly gloomy over the outlook for German industry as the prices for both electricity and gas have rocketed to levels 10 or more times what has been usual in Europe in recent years. With Russia using its gas exports as an economic weapon to further its military ambitions in Ukraine, the end of an era of cheap and reliable gas supplies is posing a severe threat to Germany's traditional business model.

There was also evidence of slowing demand from the U.S., Germany's largest non-EU trading partner, where exports fell 13.7% from June. The economic slowdown in the U.K. was also visible, as exports to there fell by 4.6%. The U.K.'s exports to Germany, which have traditionally been concentrated in oil and gas, rose 8.3% as importers substituted gas from U.K. storage facilities to cover the shortfall from Russia.

There was a glimmer of hope for the export sector earlier on Friday, when reports indicated that the current shutdown of the Nord Stream 1 pipeline for maintenance by Russia's Gazprom (MCX:GAZP) will end on Saturday as announced. Many had feared that the outage would be extended for political reasons to put further pressure on Germany and Europe in general.

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