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Export machine reawakens

Germany's export machine geared up in May, expanding by 4.3 percent to nearly offset a decline in April, data from the national statistics office showed on Friday.

Export machine reawakens
Photo: DPA

The provisional gain in May left Germany, Europe’s biggest economy and the world’s second biggest exporting nation after China, with a seasonally-adjusted trade surplus of €12.8 billion ($18.4 billion), the Destatis office said.

It revised an initial estimate for April exports to a decrease of 5.6 percent from 5.5 percent.

Imports were 3.7 percent higher in May on the month, Destatis said, following a drop of 2.5 percent in April.

“With consumption climate improving on the back of falling unemployment and rising income, domestic demand and imports should expand stronger than exports, helping other European countries to rebalance their external sectors,” Berenberg Bank senior economist Christian Schulz forecast.

On a 12-month comparison, German exports showed an increase of 19.9 percent, while imports were 15.6 percent higher.

Figures provided by the German central bank put the current account of the balance of payments, a broad measure of trade and financial transfers with other countries, at a surplus of €6.9 billion in May. That was more than double the year-earlier figure of €3.1 billion.

The numbers suggest there is still life in the German export mechanism, which has accounted for much of the country’s economic growth but which might begin to face headwinds owing to a slowdown in global activity.

On Thursday, the economy ministry reported that German industrial output rebounded in May, gaining 1.2 percent on a monthly basis after a decline of 0.8 percent in April.

Industrial orders gained 1.8 percent overall meanwhile, far exceeding analysts expectations and pointing to sustained support for manufacturers in the coming months.

Although foreign orders fell by 5.8 percent, orders from within Germany increased by 11.3 percent.

The economy is officially expected to expand by 2.6 percent this year following growth of 3.6 percent in 2010, but Chancellor Angela Merkel has said that forecast could be raised above 3.0 percent in the coming months.

Domestic consumption has begun to show signs of life, as unemployment falls further below the politically sensitive three-million mark.

A breakdown of the Destatis figures showed that Germany’s trade with partners in the 17-nation eurozone grew on a balanced basis in May. Exports increased by 16.1 percent to a total of €36.8 billion, and imports were 16.2 percent higher at €34.9 billion.

Berlin has been accused by some in the eurozone of growing at the expense of its neighbours, a charge the numbers refuted.

AFP/mry

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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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