German exports have bounced back in October, while a strong import rise suggests robust domestic demand. Cause for cheer? Not quite, according to most observers of Europe’s powerhouse.German exports took a surprising month-on-month jump in October, but that was offset by an even bigger rise in imports, resulting in a fall in the European economic powerhouse's trade surplus.
According to figures released on Monday by Destatis, Germany's national statistics office, exports rose by 0.7 percent in October from the previous month to €117.2 billion ($133.5 billion) while imports rose at an even quicker pace, up 1.3 percent to €98.9 billion.
Both figures were significantly up from those of a year earlier, exports by 8.5 percent and imports by 11.3 percent. The German economy, long powered by its dominant export sector, still commands a whopping trade surplus, but the surprisingly strong import figures have dented that surplus to the tune of almost €1 billion in terms of year-on-year figures.
The surplus fall suggests the German economy is feeling the swirls of the various global trade conflicts that have been blowing, and while the export rise is a welcome positive, industry leaders have greeted the news cautiously.
Moving forward, despite headwinds
The US-China trade conflict, as well as ongoing tensions over trade between the US and the EU, have affected Germany's strong export sector throughout 2018. Last month, German exports fell by 0.8 percent, with many analysts expecting the final quarter of the year to show similar headwinds for German exporters.
Yet the first month of that quarter has defied expectations despite the lack of a resolution in the US-China stand-off and with the ongoing uncertainty over the terms of the UK's exit from the EU, now just over three months away.
Analysts welcomed the figures but were cautious to attach too much significance to them, given the possibility of further turbulence in the global context.
"Today's data brings some relief but also shows that there is still a long way to go before the traditional growth engine will be back at full strength," said Carsten Brzeski, chief economist with the ING-DiBa bank in Germany. "The ongoing trade tensions and a general weakening of global manufacturing demand has clearly left marks on the German export sector and the entire economy."
That analysis is in line with what the German government itself has said recently. "We have many risks which could compromise our positive diagnosis," German Finance Minister Olaf Scholz said on Friday, following the release of data which showed a rise in German industrial orders.
Industry cautious
Contracts for "Made in Germany" industrial goods rose by 0.3 percent month on month, with strong eurozone growth offsetting a fall in domestic orders.
Volker Treier, the foreign trade chief of the German Chamber of Industry and Commerce (DIHK), said the latest round of figures provided a "breather" but added that there was no hiding the fact that it had been a difficult year for German exporters, compared with the predominantly sunny years they have become used to.
"The good October cannot hide that in the whole, the momentum in world trade has slowed," he said, claiming that the weaker-than-expected exports this year had cost the German export industry €55 billion. "2018 is a lost year for German exporters," he said.
Holger Bingmann, President of the BGA — a trade association which represents the German wholesale, foreign trade and services sectors — was similarly circumspect in welcoming the figures.
Pointing in particular towards Brexit, specifically the continuing chaos in the British Parliament over the EU-UK Withdrawal Bill, Bingmann underlined the level of risk a disorderly British exit could bring to the wider European economy.
Read more: No-deal Brexit fears on minds of German manufacturers
"Should the agreement fail, it would make a disorderly Brexit almost inevitable — with unpredictable consequences for the European and British economy," he said.
Wider context
While trade and industry representatives remain cautious, it is worth pointing out that the German economy is still growing and is now in its ninth straight year of expansion — hardly a grim vista.
While fears over the capacity of its export-oriented economy to handle an escalation of global trade tensions are rife, the latest figures suggest the storm is still quite a way from making landfall. As well as that, the sharp increase in imports suggests strong domestic demand — a key requirement needed to offset any prolonged export difficulties.
"Dark clouds are building up on the economic horizon, but today's numbers provide a blue patch. The crisis has been postponed," was the succinct appraisal of Thomas Gitzel from VP Bank.
