Carsten Brzeski's blog

German trade fails to gain momentum

October exports bring more evidence that the German industry’s recovery in the final quarter remains slow.

The German economy’s former growth engine, exports, is still struggling to gain momentum. In October, exports increased by 0.5% MoM, from a downwardly revised -1.0% MoM in September. At the same time, imports increased by 1.3%, narrowing the seasonally-adjusted trade surplus to EUR 20.5bn, from EUR 21.1bn in September. While the overall size of Germany’s trade surplus remains strong, the fact that exports have on average only increased by 0.1% MoM over the last 12 months compared with a historical average of 0.3% MoM underlines the near-to-stagnation status.

On a positive note, bilateral trade data shows that over the summer months, exports to the US, China and even the UK have been an important source of export growth, accounting for almost 25% of total German exports. Remarkably, up to now, the Brexit vote has not left any marks on German exports. The relatively weak euro exchange rate played an important role in this performance.

Looking ahead, however, the latest weakness of the Pound Sterling and possible protectionist policies under the new president in the US do not bode well for the outlook for German exports. It seems as if exports’ troubles to gain momentum will not be over any time soon.