After a depressing month of July for the German economy, August data proved to be very different.
It almost looks like bipolar disorder of the German economy. Down one minute, up the next. While the month of July was a month to forget for the entire industry and the export sector, August data surprised to the upside. After last week’s industrial production data, just released trade data were no exception. In August, exports increased by a whopping 5.4% MoM, from -2.6% in July. Imports increased by 3.0% MoM, from 0.7% MoM, widening the seasonally-adjusted trade balance to 22.2bn euro.
Bilateral trade data shows that over the summer months, German exports to the US and China have picked up. Particularly the latter suggests that the Chinese economy seems to have left the earlier period of weakness behind. In the Eurozone, exports to France continued their ongoing stagnation. At the same time, German exports to the UK showed the first signs of Brexit weakness.
Looking ahead, the recent nosedive of the Pound Sterling, having lost some 18% against the euro, does not bode well for the German export sector. With exports to the UK still accounting for roughly 7% of all German exports, even without a factual Brexit, the German export sector should in our view already this year pay a price for the British referendum. Adding the broader trend of a cooling of global trade, today’s surge in exports should remain a positive exception.
All in all, the extremes between the two months of July and August make it hard to identify the real trend of the German economy. Especially, as there does not seem to be a real explanation for the disappointing July figures. Brexit or the defeat of the German national soccer team at the European Championships clearly fall short in explaining the entire story. Neither does the timing of the summer vacation which in the past had been a good explanation for erratic data. The timing of the school vacation had namely not differed from the last years. Currently it seems as if the only trend of the economy is that there is no trend.