Germany: Some relief but no reason to cheer - ING

Carsten Brzeski, Chief Economist at ING, notes that the German exports recovered in February, but the revival was too weak to get overly excited and it will take a while before exports can return as powerful growth engine.

Key Quotes

“February trade data just showed that the German export sector still struggles to gain momentum. After four declines in the last six months, German exports increased by 1.3% MoM in February. As imports only increased by 0.4% MoM, from 1.3% MoM in January, the seasonally-adjusted trade balance improved to 20.3 bn euro, from 13.4 bn in January.

German exports have lost parts of their magic and strength. In the past always a reliable growth engine, net exports on average did not contribute anything to quarterly GDP growth over the last two years. In 2015, net exports even were a drag on growth. So much about export world champion.

Looking ahead, it does not look as if exports would quickly return as a powerful growth engine. Foreign orders have dropped by more than 7% since last summer, further reflecting a broader weakness in Germany’s main trading partners. Moreover, the tailwinds of the weak currency are also fading away.

With strong consumption, a booming construction sector but stagnating industry and exports as well as a reprimand from international institutions to finally step up reform efforts, the Eurozone’s largest economy is losing some of its luster. Admittedly, it is a bit tongue in cheek, but after this week’s macro data, one could even start to think the Eurozone periphery these days starts in Germany.”