German Trade Surplus: Big Stays Big

Germany, already with the largest current account surplus in the world, has posted a barely smaller trade surplus in December compared to November. In December both exports and imports shrank, with exports falling a bit faster.

Year-over-year exports are weaker compared to their 12-month growth of one-year ago. On shorter horizons, from 12-months and in, exports have become erratically weaker. Import growth is weak over the last 12-months but is stronger than it had been 12-months ago. But the bottom line is that imports are still very weak and have barely accelerated over 12 months. On shorter horizons, import growth has been erratically weaker as well. Both 3-month and 6-month growth rates are below the 12-month rate of growth which itself is below 1%.

Exports of capital goods, motor vehicles and consumer goods are weaker over 12-months than over the previous 12-months. Within the last year these categories have erratic patterns and only consumer goods exports show stability and possibly strength. Capital goods exports do grow on all horizons. Domestically the trends seem to be just the opposite for those three categories. Capital goods are erratic but seem to be reviving. Motor vehicle sales are steady and strong with growth on all horizons. But consumer goods imports are getting progressively weaker instead of gaining strength. This is not the import pattern we had hoped to see for German consumer goods.

Stronger German imports would help to reduce the huge German trade surplus and world-beating current account surplus. Stronger imports would benefit Germany's trade partners, particularly the floundering countries in the euro area. But this is not what Germany is doing.

The ratio of German exports to imports continues to rise. It has drooped only slightly month-to-month. At 125% exports are now 25% larger than imports compared to being about 21% larger one year ago. However, the growth rate of real export orders is slowing. None of these are trends that we would like to see or would choose if we were able to choose what was best for the European Monetary Union and for Germany.

Recent German reports on industrial output (today) and on orders (yesterday) weakened. While Germany is supposed to be the dependable backbone of European growth, Germany has kept its economy steadily growing by tapping demand outside the country to keep German production hopping. At the end of the day, very little of this is creating any trickledown demand for products made in the rest of the EMU. Germany remains one of the paradoxes of the European Monetary System.