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Thursday, August 7, 2008

German Exports Rise Again In June

The silver Swan, who living had no Note,
when Death approached, unlocked her silent throat.
Leaning her breast against the reedy shore,
thus sang her first and last, and sang no more:
"Farewell, all joys! O Death, come close mine eyes!
"More Geese than Swans now live, more Fools than Wise."
Orlando Gibbons: The Silver Swan

German exports rose again in June, defying the recent downward trend and pushing the trade surplus to a record. Sales abroad, adjusted for working days and seasonal changes, increased 4.2 percent from May, when they fell 3.4 percent, according to the Federal Statistics Office in Wiesbaden earlier today. This is the largest month on month increase since September 2006, although it is important to bear in mind that May exports were at a pretty low level by recent standards, and in absolute terms this months exports did not get back to the level achieved in April (which was also an unusual month due to the early timing of Easter). So it is hard to read a trend here, but my overall feeling - and strongly so - is that the tendcy is down. The trade surplus widened to 19.7 billion euros ($30 billion) from 14.3 billion euros in May, and in general the surplus over the last three months taken together has been stronger than in January to March, so that should be something positive for the otherwise pretty gloomy Q2 GDP numbers.

Exports were up 7.9 percent on June 2007. Imports fell 0.1 percent from May and rose 5.3 percent from a year earlier. The surplus in the current account, the measure of all exports including services, widened to 18.5 billion euros from 7.5 billion euros in May.

Industrial Output Also Up Slightly

German industrial output rose a seasonally adjusted 0.2 percent in June from May, according to preliminary data from the Ministry of Economy and Technology. The May figure for the month-on-month decline in industrial output growth was revised to 1.8 percent from 2.4 percent.

Manufacturing output rose a seasonally adjusted 0.5 percent in June from May, but output in the construction industry fell 2.1 percent, while output in the energy sector dropped 1.3 percent. Year-on-year, May industrial output rose 4.1 percent in unadjusted terms, and was up 1.7 percent after being adjusted for the number of working days.

For the two-month period spanning June and May, industrial output decreased a seasonally adjusted 1.8 percent from the April-March period and was 1.5 percent higher in unadjusted terms, compared with the same period of last year. And if we look at the chart for the seasonally adjusted index (see below), we will see that the level of output has been dropping more or less steadily since January/February.

But Future Orders Down

On the other hand German  manufacturing orders, as reported on this blog yesterday, fell by an unexpectedly steep 2.9 per cent in June, underlining the rapid deterioration of the country’s economic performance and raising fears about the health of the European economy as a whole.

The drop, which was much larger than expected, was the seventh consecutive month-on-month fall, the longest such downward spell in nearly 20 years. The latest figures left the average order level in May and June down 4.4 per cent from a year ago. While the headline orders figure was disappointing, the detailed breakdown is even more preoccupying, since it showed that the weakness in orders had come mainly from abroad. Orders from outside Germany fell 5.1 per cent on the month against a 0.6 per cent fall for domestic orders.

Another cause for concern was the fall in orders from within the eurozone. The drop of 7.7 per cent was almost double the 3.1 per cent drop from outside the region. As we can see in the chart below, sales to the eurozone were up again in June, but this position is hardly sustainable with the zone as a whole more than likely moving off towards recession. Indeed it was the drop in demand last autumn from Spain and Italy which initially set German exports off on their downward trend, in my opinion.

So my guess is that June's exports and industrial output were the pre-summer swansong (or last gasp for breath) before we get into the really serious business of recession.

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