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Economy in Brief

German Export and Import Growth Begins to Tail Off; Is That All There Is?
by Robert Brusca  September 9, 2021

Both exports and imports weakened in July. The sequential growth rates for exports and imports from 12-months to six-months to three-months also are in a stage of weakening and decelerating. There seems to be global slowing as the Delta variant has impeded growth by spreading infections widely. As countries take steps to address the virus, economic growth suffers and that impacts trade. While a number of countries continue to report weak trends in trade (the table below), the Baltic dry goods index that tracks global trade volumes continues to move to higher levels, indicating that globally trade is still expanding. Even though the Baltic index is up sharply, a number of national reports suggest that trade flows are, in fact, slowing.

Globally trade trends (year-on-year-growth) were flat then weakened, logging declines as the virus struck in early-2020. Around mid-year of 2020, trade flows revived and grew at some very strong rates for a short time before settling back to what have been more modest trends later in the year. Real trade flows have generally continued to be weak into 2021 as the table shows. As of July data, six-month growth rates show export volumes declining in in four of the six countries in the table. Four of six also show volume declines in exports from January 2020 to date in terms of the cumulative raw percentage change. Of course, around July of a year ago, trade volumes were still strongly recovering as a consequence of that, current year-on-year calculations show export declines for all countries in the table over 12 months. These data differ from country sources because the volume indexes have been constructed from unit value and value data instead of drawn from a national source on volume. This construction also permits a look at data that are a month fresher and up-to-date through July.

The national source data for Germany in the table below show volume data through June and commodity details also through June. The June data for Germany show sequential weakening in export and import volumes with both series showing declines over three months.

The commodity composition data also are up-to-date only through June. On that timeline, German nominal exports weaken sequentially as capital goods and motor vehicles both log declines over three months and six months. On the import side, that same story is repeated with overall nominal imports slowing sequentially, driven by declines in capital goods and motor vehicle imports over both three months and six months. Consumer goods exports and imports are relatively stable and largely growing at double-digit rates that step up from over 10% over 12 months to the 20% growth rate range over six & 12 months for both exports and imports. The catch-all ‘other trade’ flow category shows growth rates in the 50% range or even higher but without a clear trend for imports; but it shows acceleration for exports.

These developments make it hard to generalize about what ‘trade trends’ are doing. Raging commodity prices and oil prices, which since have cooled, nonetheless have boosted the nominal flows of commodities. That, of course is a different issue from trade volume trends. Chip shortages undercut motor vehicle sales and shipments. Capital goods have languished since slack capacity has not been taken up and because supply issues still dog producers. In such a circumstance, capital investment is not attractive. A variety of factors are slamming trade but outside of the areas with special problems some trade flows seem to advance quite well and are very strong. Trade flows are like animals in the zoo, some could be taken home and be quite nice house pets, others would eat you alive. There is no generalizing.

All that makes this a difficult period to analyze. Trade volume data lag as do data on the commodity composition of trade. The slowing we see in trade flows may be mostly a result of chip problems, labor supply and supply chain issues – plus some virus fear… It is possible that demand is still present but just not able to be met. However, that conclusion seems a bit glib since we would expect that consumers that are hot to spend would find something to spend their money on. Still, consumer goods exports and imports remain strong in and out of Germany. There is evidence of consumer spending having slowed to some extent outside of autos in other data.

Data are still unclear on these points; we must continue to keep tabs on the various trends to stay on top of things. For now, growth continues. Some trade is being disrupted. The virus is playing a slowdown role. And labor markets are still somewhat dislocated as people continue to try to come to terms with how they are going to live and work as the virus is still in global circulation.

WHO continues to try to warn off developed countries from booster shots in order that more vaccine might get to less wealthy countries. But in the U.S., vaccine mandates are becoming hardened and now unvaccinated people are getting the treatment of ‘second citizens’ while booster shots are definitely being planned. In the U.S., the Pfizer vaccine seems ready to go with boosters while the other vaccine- makers are still struggling to get the dosage for a booster shot pinned down.

Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
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