Economy · July 4, 2022

Germany has its first monthly trade deficit since 1991 with rising import costs

Germany recorded its first monthly trade deficit in goods of more than
thirty years due to the increase in costs for energy imports and the interruption of trade with Russia and China.

The surge in energy prices pushed up the value of imports to Europe’s largest economy, while the disruption of global trade weighed on exports, causing the $ 1 billion deficit in May.

“In the past. Germany could always rely on strong exports to boost the economy and today’s numbers show that the trade balance will not return as a positive element for growth at least for the next two years,” said Carsten Brzeski, head of research. macro at ING.

Exports from Germany fell 0.5% to € 125.8 billion in May from April, while monthly imports rose 2.7% to € 126.7 billion, according to figures released Monday by the agency. federal statistics. The trade deficit was the country’s largest since 1991.

The Russian invasion of Ukraine and subsequent sanctions imposed
Western countries’ Moscow hit trade, along with coronavirus blockades in China, crushing demand for goods from Germany
export-oriented economy.

The decline in overall German exports was partly due to a 2.8% monthly drop in exports to other EU countries, while imports from
those countries increased by 2.5%. Exports to the United States increased by 5.7% and those to China by 0.5%, but exports to the United Kingdom decreased by 2.5%.

Economists predict that high energy prices and weak exports will hit German growth this year. ING expects German gross domestic product to decline in the second quarter and Brzeski said: “There is a high probability that Germany and the rest of the euro area will go into recession this year.”

German import prices increased by more than 30% in the year to May, reflecting the surge in energy and commodity prices, while export prices rose by nearly 16% over the same period. Although trade data is reported on a nominal basis, the data is adjusted for inflation in the GDP calculation.

“Germany’s trade surplus has now vanished, thanks largely to the surge
imports, offsetting the otherwise decent momentum of exports, “said Claus Vistesen, economist at Pantheon Macroeconomics, adding that
Germany is expected to continue to run a trade deficit over the summer.

German exports to Russia have recovered some of the recent declines, rising nearly 30% from the previous month to 1 billion euros, but remain less than half the level of a year ago. German imports from Russia fell by almost 10% to 3.3 billion euros. Moscow has cut natural gas supply to Germany in recent weeks, raising fears of a shortage that could force the closure of some industrial production.

Many German companies have announced they have strong ties to Russia after the EU imposed sanctions on thousands of Russian individuals and businesses. Brussels plans to ban EU imports of Russian oil as part of a sixth sanctions package against Moscow.

There was a similar deterioration in the trade balance of the euro area as a whole, which had a goods trade deficit of € 32.4 billion in April, a reversal from a € 14.9 billion surplus a year earlier. Eurozone trade data for May is expected to be released on July 15th.