Forget July. The month of July was clearly not a good month for Germany. Not only did July see the German national soccer team leave the European Championships after the semi-final, it saw industrial and trade data taking a deep nosedive.
Just released trade data were no exception. In July, exports dropped by 2.6% MoM, from 0.2% in June. As imports decreased by 0.7% MoM, the seasonally-adjusted trade balance narrowed to 19.4 bn euro, from 21.4 bn euro in June. Even though there were some reports out yesterday, claiming another world-record current account surplus for Germany in 2016 and 2017, today’s data show that even this doubtful prize is far from certain.
Today’s data confirm the picture already painted by earlier industrial data: the former powerful engine of the German economy –industry – is stuttering. Either the entire industry took an early and long summer break, or Brexit and a general weakness in Germany’s main export partners left another mark on the economy. A further cooling of the economy in the months ahead should give more support to just-started discussions about fiscal stimulus. Right now, the discussions only focus on minor tax cuts but they could easily grow into a general debate on more fiscal support for investment to increase the German economy’s potential growth rate.