German Trade Deteriorates: Is Growth Reviving?

German imports jumped more sharply than exports in January suppressing the German trade surplus. Still, the trend for that surplus is rising as export growth has been exceeding import growth for nearly one year. Import growth at 2.3% yr/yr is just behind and on-the-heels of exports at 2.4% in yr/yr terms. This is the strongest import growth in three-months and the second strongest in eight months. Yet it begs the question of whether the German economy is beginning to improve or not.

Rising imports are usually a sign of a reviving economy. But imports also are volatile. These monthly numbers are not definitive. The import signal actually takes on greater validity over longer periods or through a signal that is a sharp move.

Import performance does not go over any of these more stringent hurdles for Germany. Imports have risen more than exports month-to-month (2.2% Vs 1.4%) but that is thin ice indeed. Over three-months imports are falling at a 7.8% annual rate compared to exports falling at a 2% pace. There is simply is not enough push in imports to take them as a signal of German economic revival. Moreover, German manufacturing orders are still falling and the domestic component of orders is weaker than the foreign component.

Germany is an export-orient economy. Right now exports are not showing much leadership for the economy as a whole. Industrial production is weak and orders are weaker.

While Germany has showed some signs of revival, most notably in the performance of the PMI signals for MFG and Services, traditional economic variables continue to show Germany still stuck in the morass of downturn. Imports have not yet turned the corner sharply enough of clearly enough to represent an upbeat assessment.