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Economy in Brief

German Trade Surplus Widens
by Robert Brusca  April 9, 2013

Germany's trade surplus continues to widen as growth in the European Community continues to struggle. In February both German exports and imports fell. German exports declined by 1.5% while imports fell by 3.8%. Trends for both exports and imports remain week.

Exports however are showing some signs of stabilization. Over three months exports are rising at a very tiny and insignificant 0.1% annualized rate. But that's better than the 7.9% annual rate decline over six months and the 0.3% decline over 12 months. For imports the story is different and clearer. German imports are declining at an increasingly rapid rate. Over 12 months imports are down 4.4%, over six months they are declining at a 7.7% annual rate, and over three months they are declining at an 8% annual rate - so much for German resistance to the temptress of recession.

Real export orders in Germany actually are doing slightly better: year-over-year where orders are up 1.1%, over six months they are up at a 1.2% annual rate pace and over three months they are up at a 4.7% pace. German exports do tend to track the export order series fairly closely. Imports are a function of domestic demand and on a monthly basis we can approximate domestic demand by looking at industrial production. That chart shows us that both industrial production and imports are on clear declining (but not plunging) trends.

Demand from the euro zone continues to be weak. Exports from Germany to within the euro area fell by 4.1% while imports from the euro nation bloc into Germany were down by 5.7%. Looking at the broader EU region, German exports to that area decreased by 3.4%.

Portugal also reported out trade data for February. It reports that exports to countries that are in the European Union fell by 4% month-to-month while export shipments to non-EU countries fell by 5.5%.

Broader export and import trends show that the year-over-year patterns for recent-reporting countries within the eurozone continue to point to weaker growth. One exception may be Spain whose data are volatile and who yet has to record data for February. But through December and January nominal exports from Spain are showing more life and a bit of a pickup compared to other monetary union members. France does not report any inflation adjusted data for its exports but on an export value basis French exports continue to decline as well. Exports from the UK similarly are declining but seem to have steadied the rate of erosion.

We can compare these trends for those in the United States and in Japan. US export values reveal one year-over-year decline of exports reported back in October; apart from that, US exports demonstrate weak but steady nominal growth at-or-below the 4% mark. Japan, a nation that has been experiencing persistent multi-year declines in the growth of export value, has been undergoing a substantial depreciation of its exchange rate. From October the negative growth rates of Japanese exports have been trimmed and over the past two months Japanese export growth offers a hint of stability and of low positive export growth rates.

Clearly the picture for global growth is weak. The guidance for growth in Asia from the Asian development Bank today was that growth in the area would be weak compared to what it had been (ADP puts that figure at 6.6%) and it continues to characterize growth in the region as fragile.

In the European monetary union various sorts of hotspots continue to turn up to erode confidence. Austerity has been so severe in Greece that it reported its first outright decline in consumer prices in 45 years. Portugal has just had its Supreme Court rule against some of the austerity measures that the government had adopted. That action will cause it to have to come up with some new budget cutting. All market participants are aware of the difficulties in Cyprus that have been handled and about which most members of the Community continue to be wary. Italy's political situation remains quite touch-and-go and should continue to raise major question marks about the prospects for stability in the monetary union.

As the largest economy in the world, goings-on in the US economy are important to Europe as well. Recent US data have been disappointing. Today's survey made available by a private independent business group, the NFIB, portrays independent (or small) businesses as very concerned about economic prospects. Its members are concerned about weak sales, disturbed by high taxes, increasingly complaining about government regulation, and despite what appears to be low-inflation they are concerned about inflation and claim to be suffering from high labor costs. It's a curious list of 'grievances' given Fed policy and the Fed Chairman's own concerns.

In short there are few bright spots in the world economy. Economists in the US will argue about whether the US is losing momentum or whether there was a one-time disruption because of political problems related to the act of budget sequestration. But none of that is good news; it's just an argument about how bad the news really has become.

However, the global scene has gotten increasingly disturbing with geopolitics offering difficulties in scattered points around the globe and with most of the major economies suffering one kind or another of economic dislocation. The background for growth remains quite difficult and challenging. For those of us who are slavishly addicted to looking at the next economic release for some insight and some hope there has been mostly disappointment.

Unfortunately, the German trade figures fit nicely into this scenario. They dovetail with the weak figures reported by Portugal. The weak exports speak to continued weak demand in Europe and more broadly globally. Weak German imports speak to the trend of weak domestic growth in Germany, a place where domestic politics are still playing out to pre-election tensions this year. Conditions in Germany may be better than in most of the rest of Europe but it's more a matter of degree than of kind.

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