Surprise Rebound In German Exports Not Enough To Calm Recession Worries

(RTTNews) - Germany's merchandise exports grew unexpectedly in April led by strong demand from China amid the post-pandemic re-opening, but the rebound was not strong enough to ward off the worries surrounding the biggest euro area economy that slid into a technical recession in the first quarter in the backdrop of persistent high inflation.

Exports rose 1.2 percent month-on-month, following a revised 6.0 percent fall in March, preliminary data from the statistical office Destatis showed Monday. Economists were looking for a 2.5 percent decline. Imports, on the other hand, fell for a second month in a row, down 1.7 percent after a 5.5 percent slump in March. Economists had forecast a 1.0 percent decline. The external trade surplus grew to EUR 18.4 billion in April from EUR 14.9 billion in March. Economists had expected a surplus of EUR 16.0 billion.

Compared to the same month last year, exports grew 1.5 percent, while imports shrunk 10.3 percent. While the US claimed the biggest share of German exports in April, the larger growth was in shipments to China. Exports to the US grew 4.7 percent and those to China increased 10.1 percent. Shipments to the UK dropped 5.2 percent. The biggest share of imports came from China in April, up 1.9 percent from the previous month. Imports from the US rose 2.9 percent, while those from the UK decreased 6.4 percent. Exports to Russia declined 17.8 percent and imports from the country fell 7.6 percent. Imports from Russia, which were mainly natural gas, are down 91.5 percent from April 2022, which is soon after the war in Ukraine began.

Once a linchpin for German economic expansion, exports are now a drag on growth. That is due to supply chain frictions, a more fragmented global economy and China increasingly being able to produce goods it previously bought from Germany, ING economist Carsten Brzeski explained.

The ongoing weakening of export order books, the expected slowdown of the US economy, high inflation and high uncertainty will leave clear marks on German exports in the near term, the economist added.

"After the collapse in March, today's export numbers bring only very limited relief," Brzeski said.

"In fact, it is a very floppy rebound and another piece of evidence that the traditional growth engine of the German economy - trade - is stuttering."

A recent survey by the ifo institute showed that the German exporters' expectations were the weakest since November with automakers, metal and textile manufacturers forecasting a decline in foreign sales in the coming months. Global interest rate hikes were gradually having an impact on demand, ifo said.

The German economy shrunk 0.3 percent sequentially in the first quarter, after a 0.5 percent contraction in the previous three months, as high inflation hurt household consumption, official data showed last month.

Two consecutive quarters of output contraction is defined as a technical recession. Exports grew 0.4 percent in the first quarter, underpinned by the robust increase in shipments of plastics and fabricated metal products. Imports decreased 0.9 percent, partly due to reduced imports of mineral fuels such as crude oil and mineral oil products, and chemicals.