Germany reported its first monthly trade deficit in goods for more than
three decades as a result of higher costs for energy imports and disruption to trade with Russia and China.
Soaring energy prices pushed up the value of imports to Europe’s largest economy, while global trade disruption weighed on exports, causing the $1bn deficit in May.
“In the past. Germany could always rely on strong exports to revive the economy and today’s numbers show the trade balance will not return as a positive element for growth for at least the next couple of years,” said Carsten Brzeski, head of macro research at ING.
Exports from Germany fell 0.5 per cent to €125.8bn in May from April, while month-on-month imports increased 2.7 per cent to €126.7bn, according to data released on Monday by the federal statistical agency. The trade deficit was the country’s first since 1991.
Russia’s invasion of Ukraine and the subsequent sanctions imposed on
Moscow by western countries have hit trade, along with China’s coronavirus lockdowns, squeezing demand for goods from Germany’s
export-focused economy.
The fall in overall German exports was partly because of a 2.8 per cent monthly drop in exports to other EU countries, while imports from
those countries increased 2.5 per cent. Exports to the US increased 5.7 per cent and those to China were up 0.5 per cent, but exports to the UK fell 2.5 per cent.
Economists expect high energy prices and weak exports to hit German growth this year. ING is forecasting German gross domestic product will shrink in the second quarter and Brzeski said: “There is a high probability that Germany and the rest of the euro area will enter recession this year.”
Prices of German imports rose more than 30 per cent in the year to May — reflecting soaring energy and commodity prices — while export prices rose almost 16 per cent in the same period. While trade data is reported on a nominal basis, the data is adjusted for inflation when calculating GDP.
“Germany’s trade surplus has now evaporated, thanks mainly to soaring
imports, offsetting otherwise decent momentum in exports,” said Claus Vistesen, an economist at Pantheon Macroeconomics, adding that he
expected Germany to continue running a trade deficit over the summer.
German exports to Russia recovered some of their recent falls, rising almost 30 per cent from the previous month to €1bn, but they remain less than half the level of a year ago. German imports from Russia fell almost 10 per cent to €3.3bn. Moscow has cut the supply of natural gas to Germany in recent weeks, raising fears of a shortage that could force some industrial production to be shut down.
Many German companies announced they were severing ties with 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 package of sanctions against Moscow.
There has been a similar deterioration in the trade balance of the overall eurozone, which had a trade deficit in goods of €32.4bn in April, a reversal from a surplus of €14.9bn a year earlier. Eurozone trade figures for May are due to be released on July 15.
