For the second consecutive year, Germany has become the country with the largest current account surplus in the world in 2017 according to the ifo Institute Center for Economic Studies (CES).
Strongly criticized by the IMF and the European Commission for its lack of engagement in stimulating the Euro-Area internal demand, Germany confirms its role as a leader in the European Union. With a current account surplus of USD 287 billion in 2017 (resp. USD 84 billion and USD 152 billion more than Japan and China; equivalent to 7.8% of German GDP in 2017), Germany is by far the most competitive country within the Euro Zone. This also validates the view that the EU works in two different cadences. With regard to recent economic data releases of this year, German January – November 2017 exports correspond to 30% of total EU (ex UK) exports in 2017, amounting to up to EUR 1’181.4 billion according to Eurostat latest release. PMI and CPI indicators are also higher than most Euro Zone countries (on average basis: PMI +3.38% and CPI Y/Y +15.20% compared to Euro Zone data for 2017). German imports from January to November 2017 have also been much higher than its European peers (ex UK) and are valued at EUR 950.60 billion. With regard to intra-European transactions, Germany remains the first European importer, equivalent to 66% of its total imports. For these reasons, we remain dubious as to the fact that Germany does not sufficiently stimulate EU internal market for the time being.
From a monetary policy point-of-view and according to the data provided above, we remain confident that the January 25th 2018 ECB January Interest Rate Decision will stay unchanged, as many countries are expected to catch-up in 2018.
By Vincent-Frédéric MIVELAZ