Germany reported its first monthly trade deficit in three decades, as companies faced rising import costs and waning demand for their products amid a bleaker economic outlook.
The deficit of the largest economy in Europe amounted to one billion euros ($1.04 billion) during the month of May, compared to expectations of a surplus of 3.0 billion euros. The German trade balance recorded the first monthly deficit since 1991, after it recorded a surplus of 3.1 billion euros in the month of April. According to data from the Federal Statistics Office, Germany’s exports fell in May by 0.5 percent compared to the previous April, reaching 125.8 billion euros.
In contrast, the value of imports rose, on a monthly basis, by 2.7 percent, to reach in May 126.7 billion euros, much more than what economists had expected. Last June, Germany’s inflation rate remained close to its 40-year peak, at 8.2 percent, although it slowed from 8.7 percent in May.
Germany relies for 75% on fossil sources (oil, gas and coal) in the field of energy, most of which are imported from abroad, especially from Russia. Oil prices have risen by more than 40 percent since the beginning of the year, while natural gas prices have risen by more than 50 percent.
“It’s no surprise that exports are declining in the current environment,” said Oliver Rakau, an economist at Oxford Economics in Frankfurt. Focus should be on imports, in particular on price developments.” The Russian military operation in Ukraine and the accompanying COVID-19-related shutdowns in China have wreaked havoc on international supply chains, with major repercussions for the export-oriented German economy.
Import prices of energy, food and inputs used by manufacturers rose more than 30 percent in May compared to the same month last year, while tariffs on exports increased by only about half that rate.
Economist Rakau believes that even if the data seem less noticeable when adjusted for inflation, foreign trade will still have a negative contribution to the growth of the German economy, which is also calculated in real terms. With the cost of living rising and uncertainty rising, “trade prospects are rather bleak,” added the economist at Oxford Economics.
Alexander Weber and Christian Seidenberg*
* Two journalists at Bloomberg specialize in covering economic news.
Published by special arrangement with the Washington Post and Bloomberg News Service.
#Germanys #trade #deficit #decades