German Trade Gaps Widens

The German trade surplus rose this month and has been moving erratically higher. In December exports grew by 0.5% as imports fell by 2.3% enlarging the surplus gap. But that has not been the general story. Over 12-months imports have outgrown exports in percentage terms. With exports up by 18.1% and imports up by 24.9% the trade surplus still enlarged over that period; it did not shrink. This result is because Germany’s exports are larger than her imports and, as a result, imports have to grow about 20% faster than exports to shrink the nominal surplus. So in some sense Germany has been taking some of the steps it needs to take in order to reduce its surplus even though its surplus has been growing. The growth rate of its surplus has slowed, and that is something.

The German trade surplus rose this month and has been moving erratically higher. In December exports grew by 0.5% as imports fell by 2.3% enlarging the surplus gap. But that has not been the general story. Over 12-months imports have outgrown exports in percentage terms. With exports up by 18.1% and imports up by 24.9% the trade surplus still enlarged over that period; it did not shrink. This result is because Germany’s exports are larger than her imports and, as a result, imports have to grow about 20% faster than exports to shrink the nominal surplus. So in some sense Germany has been taking some of the steps it needs to take in order to reduce its surplus even though its surplus has been growing. The growth rate of its surplus has slowed, and that is something.

German exports are slowing as their growth rates from 12-Mo, to 6-Mo, to 3-Mo are steadily diminishing. But for imports, growth rates fell from 12-Mo to 6-Mo but then jumped over three-months. Their trend is less predictable right now.

Capital goods imports are accelerating in Germany while capital goods exports have slowed. Motor vehicle imports have surged and accelerated as motor vehicle exports have flattened and slowed marginally. Consumer goods are weaker for exports than for imports but both flows are showing contraction over three months and are flat to lower over six months. Despite the revival in German imports the consumer has little to do with it.

On balance German export figures look worse than we would gauge them to be from German orders data where foreign industrial orders continue to rise strongly. The import side of the equation has come to life but Germany but German consumers and consumers who are buyers of German export goods are two groups whose spending habits remains lethargic.