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Economy in Brief

German Exports Rise But Still Lag
by Robert Brusca  December 9, 2021

German exports are up by a solid 4.1% month-over-month in October, but imports are up by a stronger 5.0%. Exports are running at around a 10% annualized pace over 12-months six-months and three-months. But imports are up at a stronger 20% pace over 12 months, they slow slightly to 17.6% over six months then accelerate to a 34% pace over three months.

One month lagged trends
Expressed in real terms, German trends look completely different. Inflation-adjusted data lag by one month. And the aggregate export and import flows contract on all horizons in real terms. Both real exports and imports show steady decelerations in growth rates from 12-months, to six-months, to three-months.

Nominal flows compared with a one-month lag difference
These results underscore just how virulent inflation has been in Germany and how inflation continues to be strong as it plays out on export and import products. The table also provides nominal exports and imports with growth rates displayed on one-month lag to allow us compare apples to apples for real and nominal trade flows. A difference of one month in calculating nominal growth rates makes a huge difference as the table demonstrates. One month lagged nominal exports fall at a 3.8% pace over three months but they rise at a 10.6% pace on topical data. Lagged nominal imports fall at a 0.7% pace over three months while topical nominal imports grow at a 34% annual rate. So we clearly want to compare real and nominal data for the same periods and we also want to be careful not to ‘buy into’ any of these changing trends too fully since growth rates can shift so much on just a one-month shift in the calculation period.

Real vs. nominal flows (both lagged)
On one-month lagged basis nominal imports grow by 13.3% over 12 months but slow over six months and decline over three months (at a -0.7% annualized rate). In real terms, imports are much weaker than that falling by 3.8% over 12 months and contracting at a 19.1% annual rate over three months.

Nominal exports lagged also show steady deceleration that transits from 7.3% growth over 12 months to a decline over three months at a -3.8% annual rate. Real exports fall over 12 months at a -0.6% annual rate; that worsens to a -15.2% annual rate over three months. Both of those comparisons are much weaker than for nominal exports.

Commodity composition of trade trends (nominal)
The four export and import categories on a lagged basis show broad-based declines. Exports show negative growth rates over three months for capital goods and motor vehicles. So do imports but with consumer goods imports declining as well.

For imports one-month lagged nominal capital goods, motor vehicles and consumers goods show decelerations (well, nearly so for motor vehicles, anyway) as well as culminating in declines over three months. Even ‘other imports’ show deceleration but that category finishes with a three-month nominal growth rate at 21.4%.

Lagged nominal export categories show steady decelerations for capital goods as well as consumer goods. But consumer goods exports rise over three months. Motor vehicle exports do not exactly steadily decelerate but the difference amounts to knit picking and motor vehicles also end the progression with a substantial negative three-month rate of growth. The catch-all ‘other’ category for exports shows strong steady nominal growth while for imports ‘other imports’ show deceleration from 12-months to six-months to three-months but as noted above, also continues to display strong nominal growth over three-months.

Table 1: Export and import trends

Delta, Omicron and so on
Germany continues to go through tough times. It is currently still experiencing a Delta virus flare up. As with everyone else the future is still uncertain, but Germany is adopting more of a real time full court press to try to force the unvaccinated to become vaccinated. During the period that these stringent rules are in force to restrict the activities of the unvaccinated, we can expect some further downward pressure on economic activity in Germany. After that, it will depend on how successful Germany is in gaining vaccination compliance a well as what develops with the Omicron variant.

Industrial trends
We have already seen weakness in German orders. In October, industrial output in Germany did rebound in October, but German output trends also show sequentially weaking growth rates for industrial output with negative growth rates over 12 months, six months, and three months. However, other surveys of industrial trends in Germany are not as clear cut. We can easily conclude that the outlook is murky but at this point it is hard to tell just how negative the trend has become, but it seems to tend in the direction of being negative.

Table 2: Industrial German output trends

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