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Rebounding trade and weak euro boost exports

German exports surged in February after sharp drop in January, official data showed on Friday, boosted by stronger global trade and a weaker euro.

Rebounding trade and weak euro boost exports
Photo: DPA

German exports jumped by 4.7 percent from January, and recorded a yearly gain of 9.6 percent, the Destatis statistics office said. The country’s trade surplus climbed to €12.6 billion ($16.8 billion) from €8.9 billion in February 2009, it added.

The data represented a partial correction of January’s steep 6.3 percent monthly drop in exports, and indicated that an increase in global trade was benefiting Germany’s export-led economy, the biggest in Europe.

Germany lost its title of leading global exporter to China last year, but will also get a boost this year from the euro’s fall in value against other major currencies.

In February, German exports reached a total value of €70 billion, while imports increased by 4.2 percent on an annual basis to €57.3 billion, Destatis said.

The country’s current account balance of payments, a broader measure of trade with other counties, showed a surplus of €9.1 billion in February, up from €7.1 billion a year earlier.

Germany has been criticised by less competitive eurozone partners for focusing on exports at their expense while neglecting measures to boost domestic consumption.

“Today’s sharp increase in German exports was not, yet, enough to turn net

exports into a growth driver in the first quarter but it clearly shows that the export-led recovery is still intact,” ING senior economist Carsten Brzeski commented.

Although other German data for February has disappointed, with stagnating industrial production and orders and weak private consumption, a large part of the government’s stimulus plans have yet to kick in, he noted.

“Positive growth surprises are still in the pipeline,” Brzeski concluded.

For UniCredit counterpart Andreas Rees, “the latest trade figures resemble more a ride in a rollercoaster than a fundamentally meaningful pattern.”

He forecast that German growth would be weak in the first three months of the year but added: “We might get a German economy rising like a phoenix in the second quarter.”

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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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