Trade stagnation. German exports remained unchanged in April, after two strong months in March and February. As imports continued their recent drop, decreasing by 0.2% MoM, the seasonally-unadjusted trade balance narrowed to 25.6bn euro, slightly down from last month’s all-time high. New evidence that the German economy is struggling to gain further moment.
Looking at the bilateral trade data for the first quarter, evidence shows up why at least the Germans and the German government should step up their efforts to strengthen European or at least Eurozone integration. Compared with the first quarter of 2015, exports to the US and China were down in the first quarter of 2016 by more than 1% and 3% respectively, showing that global cooling did have an impact on the German economy. At the same time, however, exports to the rest of the Eurozone and the UK were actually up compared with the first quarter of 2015. While Germany is again exporting more to its Eurozone peers, the fact that the trade surplus vis-à-vis the Eurozone is widening suggests that stronger domestic demand in Germany is not necessarily benefitting the rest of the Eurozone.
The first batch of hard economic data suggests that the German economy is treading water. After a strong growth performance in the first quarter on the back of strong consumption and construction, all hard data for April was weaker than in the first quarter, and GDP growth looks set for a slowdown. For the time being, the strength of the domestic economy, also on the back of the positive short-term impact from the refugee influx, is currently the best insurance against a sharp slowdown. However, several external risks but also domestic political uncertainty and the reluctance to step up structural reforms are the biggest hurdles for future growth.