German trade adds to growth concerns - ING

Carsten Brzeski, Chief Economist at ING, suggests that while Germany is still licking its wounds after last night’s defeat at the Euro2016, the just released trade data have little to cheer up the economy.

Key Quotes

“In May, exports dropped by 1.8% MoM, from 0.1% in April. As imports increased by 0.1% MoM, the seasonally-adjusted trade balance narrowed to 22.1bn euro, from 24.1bn euro in April. Another indicator signaling that Germany’s performance is currently not champion-like.

Looking at bilateral trade data, 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. As the loss of economic momentum is currently widely spread and has infected almost all global regions, one of German exporters’ strength – diversification – is being hampered. Interestingly, the only region to which German producers have exported significantly more than last year is the Eurozone. 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.

Today’s trade data mark the end of a disappointing week for the German industry. All May data point to a sharp slowdown of the German industry. Probably the entire batch of industrial data will not get the attention it deserves. Germany will be mainly busy digesting and analysing its own exit; the exit from the Euro2016, the European Soccer Championships. However, to offer some solace: if there is any economic impact from soccer, last night’s result was the best possible outcome for the Eurozone: stimulus and psychological support for France, while at the same time Germany can still feel superior.”