Carsten Brzeski, Chief Economist at ING, notes that German exports
dropped in October but the weak euro helps in dampening the impact from
lower global demand on the German economy.
Key Quotes
“German exports dropped by 1.2% MoM in October, from +2.6% in September. As imports dropped by 3.4% MoM, the seasonally-adjusted trade balance actually improved to €20.7bn, from €19.2bn in September. In our view, the October drop in exports is a technical correction after strong September data, rather than a structural shift. It is also very hard to attribute this drop to the Volkswagen emission scandal.”
“Despite the negative contribution of net exports to German GDP growth in the third quarter, the export sector remains an important growth driver. Since 2009, net exports have contributed 0.1 ppt to quarterly GDP growth; or one third of GDP growth every quarter.”
“A closer look at German export destinations shows that during the first nine months of the year, exports to China were down 2.5% YoY, showing the negative impact from the ongoing slowdown of the Chinese economy. At the same time, exports to Russia fell further, dropping another 28% on the back of sanctions. On the positive side, exports to the US grew by more than 20%, reflecting the direct impact of the euro weakening. Moreover, exports to the UK (+14%) and Eastern European countries (+9%) compensated for weaker demand from China.”
“Not surprisingly, Germany is amongst the biggest beneficiaries of the weaker euro, seeing its exports to non-Eurozone countries growing at a faster rate than the rest of the Eurozone; except for Ireland. While German exports to non-Eurozone countries grew by more than 9% during the first nine months of the year, Eurozone exports increased by 6%.”
“German exports have become a mixed bag, with surprises and diverging trends. With many economic slowdowns and geopolitical conflicts around the world, exports will continue having troubles gaining more momentum in the period ahead. However, as long as the monetary policy divergence on both sides of the Atlantic continues and the ECB continues with QE, exports should remain supportive to growth.”
Key Quotes
“German exports dropped by 1.2% MoM in October, from +2.6% in September. As imports dropped by 3.4% MoM, the seasonally-adjusted trade balance actually improved to €20.7bn, from €19.2bn in September. In our view, the October drop in exports is a technical correction after strong September data, rather than a structural shift. It is also very hard to attribute this drop to the Volkswagen emission scandal.”
“Despite the negative contribution of net exports to German GDP growth in the third quarter, the export sector remains an important growth driver. Since 2009, net exports have contributed 0.1 ppt to quarterly GDP growth; or one third of GDP growth every quarter.”
“A closer look at German export destinations shows that during the first nine months of the year, exports to China were down 2.5% YoY, showing the negative impact from the ongoing slowdown of the Chinese economy. At the same time, exports to Russia fell further, dropping another 28% on the back of sanctions. On the positive side, exports to the US grew by more than 20%, reflecting the direct impact of the euro weakening. Moreover, exports to the UK (+14%) and Eastern European countries (+9%) compensated for weaker demand from China.”
“Not surprisingly, Germany is amongst the biggest beneficiaries of the weaker euro, seeing its exports to non-Eurozone countries growing at a faster rate than the rest of the Eurozone; except for Ireland. While German exports to non-Eurozone countries grew by more than 9% during the first nine months of the year, Eurozone exports increased by 6%.”
“German exports have become a mixed bag, with surprises and diverging trends. With many economic slowdowns and geopolitical conflicts around the world, exports will continue having troubles gaining more momentum in the period ahead. However, as long as the monetary policy divergence on both sides of the Atlantic continues and the ECB continues with QE, exports should remain supportive to growth.”
