Economy in Brief

The German trade surplus in January had surged to nearly €16 billion. In February it had basically held to the gains made in January. The German surplus hit its low point and the later part of 2022 and has since been on the rise. During that time, both export and import growth had fallen very sharply, but import growth had fallen faster than export growth leading to the rise in the surplus.

German nominal exports in February rose by 4% after rising by 2.5% in January. So, the sequential growth rates show a 12-month growth rate in exports of 7.6% over 12 months, at an annual rate of 1.7% over 6 months and then even slower annual rate of 0.8% over 3 months.

German nominal imports rose by 4.6% in February after falling by 1.4% in January. Import growth is at 3.8% over 12 months, weaker then export growth, then declines at a -19.4% annual rate over 6 months. That pace of decline is slightly reduced over 3 months to -13.1% at an annual rate.

On balance, exports show signs of slowing but is still growing in nominal terms while imports are weak and declining over 3- and 6-month horizons.

Converted to real terms, we have export and import data available for January. January real exports grew 3.6% month-to-month while imports were flat. The profile of real export growth shows 12-month real exports up by 1.3%; over 6 months they are up at a 2.5% annual rate, but over 3 months they are falling at a -8% annual rate. Real imports on the same timeline are rising by 0.1% over 12 months, falling at a -9.4% annual rate over 6 months and falling at an even faster -13.5% annual rate over 3 months. The trends in inflation-adjusted trade show much more weakness than for nominal exports and imports, but the imports clearly are weaker than exports on a real basis.

The bellwether for Japan's Tankan report is the manufacturing sector for large enterprises. In the first quarter, the large firm index fell to a survey value of +1, down from +7 in the fourth quarter; the fourth quarter was slightly lower than the third quarter at +8, and the third quarter was slightly weaker than the second quarter at +9. In all, there are five quarters in a row in which the large enterprise manufacturing index weakens quarter-to-quarter. And there are six quarters since the Tankan for large manufacturing firms rose quarter-to-quarter (last done in Q3 2021).

However, the nonmanufacturing index in the first quarter improved, moving up to 20 from 19. That index had improved in the fourth quarter as well. The nonmanufacturing index has been rising for four quarters in a row. Manufacturing and nonmanufacturing have been going their separate and quite different ways for some time now.

At a +1 reading in Q1 2023, the manufacturing index for large enterprises is weak; it has a 26.7 percentile standing that compares to nonmanufacturing at +20 in Q1 2023, where the index has a 74.7 percentile standing.

Nonmanufacturing industries Among the nonmanufacturing sectors, the weakest standing is for restaurants & hotels with a 44th percentile standing, although that sector made a strong improvement in the fourth quarter, moving from a -28 reading to 0 and staying there in the first quarter of 2023. Transportation has a sub 50% ranking with the standing at the 48th percentile mark; transportation weakened sharply in the first quarter falling to a +10 from a +17 reading in the fourth quarter. The strongest nonmanufacturing industries from a ranking perspective are personal services with a 76-percentile standing, retailing with an 90.7 percentile standing and wholesaling with a 98.7 percentile standing.

Outlook survey The outlook survey for the second quarter sees manufacturing weaker at a reading of +3, down from +6 in the first quarter; the outlook has weakened for four quarters in a row. Nonmanufacturing has strengthened its outlook for Q2, rising to a reading of +15 from +11 in Q4 2022. The outlook for manufacturing has a 26.7 percentile standing while nonmanufacturing has a standing in its 74.7 percentile.

Since COVID The table also offers longer comparisons on changes in the Tankan reading from Q1 2020 before COVID struck. On this timeline, manufacturing has improved by 9 points and nonmanufacturing is better by 12 points. The outlook for the quarter ahead is stronger for manufacturing on that timeline by 14 points while the nonmanufacturing outlook is stronger by 16 points..