The German Juggernaut: A Closer Look at April Trade Figures

China is the world's largest exporter.  Yet with the exception of the distortions caused by the timing of the Lunar New Year holiday, China's exports have been falling on a year-over-year basis each month this year (save for February).  Earlier today it reported exports in May were 2.5% lower than a year ago.    

It does look like Chinese exports are bottoming out.   Export volumes appear to have risen in May, but competitive price cuts lowered the value of its foreign shipments. 

Germany is the world's second largest exporter.   It reported April trade data earlier today.  In the first four months of the year, its exports are up 5.9%.  They rose 1.9% in April on a seasonally adjusted basis, which is the largest monthly increase of the year.  

Exports to fellow eurozone members are subdued but still positive.  They are up 3.1% year-to-date at 145.1 bln euros.  German exports to other (non-EMU) EU countries are up 7.1% to 84.2 bln euros.   Exports to other countries are up 7.9% to 164.4 bln euros.   The difference in performance is likely a function of two factors; growth differentials and currency impact, and we would tend to put more weight on the latter.   

Eurozone growth in Q1 was stronger than expected.  France, the largest economy in EMU after Germany, expanded by 0.6%, its strongest quarterly performance in Q2 2013.  Italy, the region's third largest economy grew by 0.3% in Q1.  That is the strongest since Q1 2011. It has now experienced two consecutive quarters of growth since H1 2011.   Spain is the EMU's fourth largest economy, and it has continued to accelerate.  Its 0.9% quarterly expansion in the January-March period is the strongest performance since Q4 07. 

The euro finished this past April near $1.1225.  This represents a 19% depreciation from the end of April 2014.  The euro may still be too strong for some in Europe, but it contributes to the hyper-competitiveness of the German economy. 

On the other side of the balance are imports.  German imports are up 2.1% year-to date at 313.1 bln euros from the first four months last year.  Imports from fellow EMU members lagged and are up 1.1% over the same period (to 140.7 bln euros).  Imports from the eurozone increased in April year-over-year, which means that national growth of eurozone members did not benefit in Q1 from exports to Germany.  

German imports from other EU countries rose 1.4% year-to-date (to 63.2 bln euros).  In April, they fell 0.8% from a year ago.  Just like German exports to non-EU countries was stronger than to EU countries, so too are imports.  German imports from non-EU countries are up 3.7% year-to-date to 109.2 bln.  They were up 5.1% in April year-over year.   

Germany major trading partners outside of Europe, include China, the US, Russia and Vietnam.  Although bilateral trade figures trade figures are not yet available, given the sanctions, we assume that if anything German exports to Russia have fallen.  On the other hand, we are also under the impression that some German producers  have production facilities in Russia rather. 

The large German trade surplus is a cause of some consternation.  The EU has been critical of it.  Individual countries within EMU have been critical.  Earlier today from the G7 meeting, Italy's Prime Minister Renzi noted that the German trade "surplus is an issue."  In its semi-annual report on the foreign exchange market and the international economy, the US Treasury has been critical.   The US argues that the much fiscal consolidation in the much of EMU is not being offset by more stimulative policies by the surplus countries, like Germany.   

Germany resists the international pressure.  It argues that the ECB's unorthodox monetary policy measures, which are driving the euro lower, are being implemented over its objections.  It also argues that German is an aging population.  Its demographic dynamics appear to be deteriorating faster than in Japan.   It surplus savings (current account surplus) needs to be understood within the rubric of the life-saving cycle.   However, its ultimate defense is that the German surplus is a distraction.  A smaller German surplus is not a substitute for the structural reforms that are so desperately needed. 

The German Juggernaut: A Closer Look at April Trade Figures The German Juggernaut:  A Closer Look at April Trade Figures Reviewed by Marc Chandler on June 08, 2015 Rating: 5
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