German Trade Surplus Ticks Up on Very Weak Imports

The German trade surplus has generally been withering over the past year or so, but in January it has made a reversal and started to improve slightly. Nominal imports fell by 4.3% in January, dominating the trend for the trade account in the month. Exports also fell by 3.1%, but the bigger drop in imports caused the trade surplus to get larger. January was a race to the bottom and imports won.

Sequential growth rates tell an uneven story with exports growing 7.6% over 12 months. The pace slows to 3.4% over six months, then exports go stagnant with no-gain over three months. That part of the story is clear enough and it's an ongoing export deceleration. But for imports, the growth rates have been stronger and relatively steady at 22.1% over 12 months, at 20.4% over six months, then falling sharply to 12.6% over three months. But paired up against the export growth rates, imports are stronger by a wide margin on each of those horizons. And despite the sharp deceleration in import growth over three months, imports still are quite a bit stronger than exports over three months.

Much of what we see in these trends is related to price developments. We can make a comparison by looking at nominal versus real trade flows. However, to do that we have to look at data that are lagged by a month, since that is the most topical real trade flow data we possess. On that basis, exports appear much firmer, rising at a 12.1% pace over 12 months, at a 12.8% pace over six months, and culminating at a 31.7% pace over three months. Although those are enlivened flows on data updated through December (one-month lag; see shaded cells in the table), compared to imports they're still the weak ones. Imports are up at a 24.8% pace over 12 months, at 25.4% pace over six months and at a 59.1% annual rate pace over three months. Nominal import data continue to dominate export data even when we lag them by a month period and when exports 'wake up.'

We look at the lagged nominal data so we can compare them to the real flow data which are available topically only through December. Real flow data lagged one month show exports are up by 1.1% over 12 months, falling at a 0.7% pace over six months and then rising at a 15.8% pace over three months. Those flows compare to imports where lagged real imports are up by only 0.7% over 12 months and are lagging exports that are up by 1.1% over 12 months. Real imports fall by 1.2% over six months, again putting exports on stronger ground since they fall by only 0.7%. Real exports pickup to grow at a 15.8% rate over three months, but real imports pick up by more and reach a growth rate of 21.3% putting imports back in the lead.

Taking price out of the equation puts exports and imports on a much more even footing for growth. However, prices are in the equation. Rising oil prices and commodity prices have been part of the problem in this cycle and we can see that's one of the main forces that has been dogging the German trade deficit. Its pattern of deterioration reverses this month, not on revived exports but on weaker imports.