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TRADE

German trade surplus surges in June

Germany's trade surplus surged in June, data released on Thursday showed, offering some relief after a bleak series of figures pointing to a severe economic slowdown.

German trade surplus surges in June
Photo: DPA

The trade surplus grew to €19.7 billion ($30.4 billions), from a revised €14.3 billion in May, the federal statistics office Destatis said in a statement.

Germany’s current account, the widest measure of trade and financial transactions with other countries, showed a surplus of €18.5 billion, more than double the May level of €7.7 billion, Destatis said.

Analysts polled by Dow Jones Newswires had forecast a trade surplus of €15.0 billion and a current account surplus of €12.0 billion. German exports jumped by an unadjusted 7.9 percent in June from the same month a year earlier, while imports increased by 5.3 percent. When corrected for seasonal and other calendar effects, exports were up by 4.2 percent to €85.9 billion, while imports had slipped by 0.1 percent to €67.8 billion.

The figures were good news following a string of numbers that had indicated the German economy was slumping heavily after initially appearing to have withstood a global slowdown.

On Wednesday, data showed that industrial orders had fallen in June for a record seventh month in a row, suggesting that trade figures in the coming months were likely to show weaker exports, the main engine of economic growth. A report in the Sueddeutsche Zeitung on Tuesday quoted government experts as saying that in the second quarter of 2008, the German economy had contracted by around 1.0 percent. Official figures on the second quarter will be published on August 14.

UniCredit economist Andreas Rees sounded a cautious note, however, saying that although exports in June rose at the strongest pace in nearly two years, there was “no reason to celebrate.”

“Looking at the medium-term trend, the outlook for exports is really bleak,” he said.

In June 2007 new orders from other members of the eurozone – the most important marker for German firms – rose by almost 37 percent. But one year later, they nosedived by 25 percent, Rees said.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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