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CHINA

Report confirms China overtakes German exports

Official numbers from the Germany’s Federal Statistics Office (Destatis) on Friday have confirmed that China has surpassed Germany as the world's leading exporter.

Report confirms China overtakes German exports
Containers in China. Photo: DPA

In the 11 months from January to November, Chinese exports were worth a total of $1.07 trillion, while the German data showed that exports from Europe’s biggest economy amounted to €734.6 billion, or $1.05 trillion.

In November, the German trade surplus nonetheless climbed to €17.2 billion, according to seasonally corrected figures from the Destatis service, from €13.6 billion in October amid a pickup in global trade.

“The German product specialisation with a high share of capital goods and high presence in Asian markets, make Germany one of the main beneficiaries of an investment-led global recovery,” ING senior economist Carsten Brzeski said.

He noted that German exports to China had increased by almost 12 percent from November 2008, and that the unadjusted German trade surplus of €17.4 billion was the country’s biggest since June 2008.

Germany is slowly recovering from its worst recession since World War II, after its economy contracted by around five percent in 2009.

Analysts polled by Dow Jones Newswires had expected a much smaller November trade surplus of around €11 billion, and the figures will be welcomed following the release of disappointing retail sales data on Thursday.

On the balance of payments current account, a broad measure of trade that indicates a country’s ability to pay its way in the world, Germany posted a surplus of €18.1 billion, up from €11.1 billion in October.

That was also well above analysts’ forecasts for a surplus of €10 billion.

The indicator is important for the long-term confidence of investors and trading partners, but could reinforce critics who say Germans should consume more to contribute to a more balanced global economy.

Brzeski said however that exports would continue to lead the German recovery this year and added: “After yesterday’s disappointing retail sales numbers, it is good to know that the German economy can at least rely on a good old friend: its strong export sector.”

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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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