Brandenburg Gate in Berlin, Germany

Germany Trade January 2019

Germany: Trade surplus widens despite drop in exports

The seasonally- and calendar-adjusted trade surplus rose from EUR 18.6 in January to EUR 18.7 in February, driven by a stronger fall in imports than exports. Exports contracted 1.3% month-on-month in February, down from January’s flat reading and a steeper contraction than anticipated by market analysts. Imports, meanwhile, fell 1.6% month-on-month, contrasting the 1.4% expansion in January.

Year-on-year data painted a less grim picture, however. Exports rose a strong 3.9% in February over the same month a year earlier (January: +1.7% year-on-year), with the 12-month moving sum of exports accelerating slightly to 2.6% in February from 2.5% in January. Growth in imports also accelerated in February from 4.9% in January to 5.1%; the 12-month moving sum of imports was nonetheless stable at January’s 5.5% in February. The 12-month moving sum of the trade balance consequently narrowed fractionally from a EUR 228.0 billion surplus in January to EUR 227.2 billion in January.

Combined with weak manufacturing data, the German economy is likely to have expanded at a meager pace in the first quarter, despite still-robust underlying domestic fundamentals. “The German export sector is still wrestling with global uncertainty”, said Carsten Brzeski, chief economist at ING Germany, commenting on February’s trade data release. However, he added there are several factors that could turn the tide in the remainder of the year. In trade-weighted terms, the exchange rate has depreciated since late-2018; real-time indicators point to a pick-up in global trade; and “relief in the trade tensions between the US and China should also benefit German exports”, according to Brzeski.

Dr. Holger Bingmann, president of the Federation of German Wholesale, Foreign Trade and Services (BGA), struck a more cautious tone, noting that the recent figures underline the critical situation in the global economy. This, Dr. Bingmann continued, is having a negative effect on the German export-orientated industries and “the end of the paralyzing state of limbo is not in sight.” Moreover, in addition to possible U.S. tariffs on European cars and EU counteractions, the prolonged Brexit uncertainty is a cause of irritation where “clarity on the future relationship [is needed] as soon as possible.”

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