German trade surplus widens in July
The German trade surplus widened in July as exports unexpectedly rose, according to data released by Destatis on Monday.
Seasonally-adjusted exports pushed up 0.7% on the month in July compared to a 0.1% drop in June and expectations for a 0.5% decline. Meanwhile, imports fell 1.5% versus expectations for a 0.5% jump.
The seasonally-adjusted trade surplus rose to €20.2bn in July from a downwardly-revised €18bn in June. Not adjusted for seasonal and calendar effects, the trade balance widened to €21.4bn from €16.6bn.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the figures suggest that the third-quarter GDP headline will be "a tug-of-war" between weakness in goods spending, manufacturing and construction and mean reversion in net exports from the second-quarter plunge.
"If the August trade numbers look anything like today’s data, the economy could well avoid that recession after all. Meanwhile, the underlying message is downbeat. Growth in exports remains weak. The year-over-year rate edged higher to just +0.8%, from -0.5% in June, and the IFO export expectations gauge suggest that it will dip back below zero in due course.
"Imports slumped by 3.0% year-over-year, warning that domestic demand for foreign goods is rolling over, which is a classic sign of overall weakness in the economy. That said, import growth averaged about 2% y/y through Q2, so we doubt that the trend has suddenly collapsed to -3%."
ING economist Carsten Brzeski said: "At least some relief for the economy, as exports increased in July. The outlook, however, has not improved.
He said that looking ahead, the US-China trade battle spat will be important for the outlook for German exporters.
"This is not just because of the ongoing conflict but also because of a possible conflict between the US and the EU, with President Trump already joking about tariffs on cars, and future trends in the Chinese market for automotives. The currency is another channel through which the trade conflict can harm the German economy. In August, the nominal effective exchange rate of the euro was still close to its 2018-average, providing little support for exports. However, over the last few weeks, the effective exchange rate has lost some ground.
"Following and analysing the German economy requires a high capacity for suffering these days. This morning’s trade data brings a very weak ray of sunshine. Nothing more but luckily also nothing less."