German Exports Creep Up Again In March

German exports were up for the first time in six months in March, adding to signs that the pace of the economic contraction slowed slighly as we entered the spring. Exports, adjusted for working days and seasonal changes, were 0.7 percent from February, when they fell 1.3 percent, according to the latest data from the Federal Statistics Office. Year on year exports were down 15.8% following a 23.5% drop in February and a 23.2% drop in January.




German imports increased 0.8 percent in March from the previous month, when they dropped 4.8 percent. The trade surplus widened to 11.3 billion euros from 8.6 billion euros in February. The surplus in the current account, the measure of all trade including services, was 10.2 billion euros, up from 6.8 billion euros. On a seasonally adjusted basis exports were up by 0.4 billion euros from February, which means you can just barely notice the change on the chart below: ie there is still a very long way to go here.




The euro-area economy, Germany’s largest trading partner, will probably shrink 4 percent this year and 0.1 percent in 2010, the European Commission said on May 4. In Germany, the economy may not return to growth before the second half of 2010, Bundesbank President Axel Weber said on May 4.


Industrial Output

German industrial production held more or less steady in March, for the first time in six months. Output was unchanged from February, when it dropped 3.4 percent, according to the latest data from the Economy Ministry in Berlin. Manufacturing industry continued to contract however, and was down 0.4% on the month, and by 22.8% year on year.



That being said, German industrial output levels are now very low (see chart below), and are roughly comparable with those registered in 1999/2000.

European Economic Sentiment Indicator Recovers Slightly

In April, the Economic Sentiment Indicator (ESI) for the EU and the Eurozone picked up for the first time since May 2007 (excluding a small blip in March 2008 for the EU). The Business Climate Indicator (BCI) for the Eurozone increased in April.


The rebound in the ESI resulted from a clear improvement in sentiment in industry and among consumers, which increased by 3.5 points in the EU, and by 2.5 points in the Eurozone, to 63.9 and 67.2 respectively.



ESI in both regions rose by the same amount (3 points), and a smaller increase in services (+1 point in both regions). Retail trade sentiment grew by 2 points in the EU, but fell by 2 points in the Eurozone.

Construction, in contrast, declined in both areas – by 1 point in the EU and by 2 points in the Eurozone. The majority of Member States registered an improvement. Among the largest Member States, Italy (+6.4 points), the UK (+5.1), the Netherlands (+4.2), Spain (+4.1), and Poland (+3.8) witnessed significant increases in sentiment, while the rise was less sizeable in France (+1.0) and Germany (+0.8).

The financial services confidence indicator – not included in the ESI – improved markedly in both areas, by 11 points in the EU and by 16 points in the Eurozone. Compared to March, managers' assessment of business situation and demand for their services augmented significantly. Managers' expectations of demand improved strongly and became positive for the fist time since October 2008.

The quarterly manufacturing survey, carried out in April 2009, indicates a further fall in capacity utilisation since the last survey in January: it now stands at 71.0% in the EU and 70.5 % in the Eurozone – the lowest since 1990.

However, new orders received in the past three months and expectations about export orders in the next three months improved marginally from the low recorded in January.

According to the six-monthly industrial investment survey which was carried out in March and April of this year, managers in most Member States expect a sharp decrease in their investment volumes in 2009 compared to 2008. More specifically, in 2009 real investment is expected to drop by 18% in the EU and by 20% in the Eurozone. This represents a significant downward revision of expectations from the -5% reported in both regions in the previous investment survey (conducted in autumn 2008).

The Business Climate Indicator (BCI) for the Eurozone increased in April. This is the first improvement since May 2008. The indicator nevertheless remained at a very low level, pointing to another negative outcome for year-on-year industrial production growth in March, after the record fall registered in February. Given the current levels, it also suggests that annual industrial production growth will remain clearly subdued in April.

The rise in the BCI reflects an improving situation in most of its underlying components. Managers' production expectations picked up clearly in April, while the production trend observed in recent months improved only slightly. Their assessment of current overall order books and stocks of finished goods recovered marginally from last month's level, though export order books continued to worsen.

Retail Sales Stabilise In April

The Bloomberg Euro-Zone Retail Purchasing Managers' Index rose in April to 48.4, from 44.1 in March, the slowest rate of decline since June 2008. Although sales have now fallen for 11 consecutive months, the rate of decline has steadily eased back from the series record low registered last November.

Retail sales again fell compared to one month earlier in each of the three largest euro economies. In all cases the rates of contraction slowed and the differentials between the three countries narrowed. Survey respondents reported that sales were aided by better weather and car scrapping incentives, and also noted some improvement in consumer sentiment compared to recent lows.

Italy continued to register the steepest overall fall in retail sales. The month-on-month sales index rose from 41.9 in March to 46.8 to indicate the weakest rate of decline since October 2007.



Retailers in Germany saw sales fall at the slowest pace in the current 11-month sequence of decline. Sales were down only modestly during April to represent a marked contrast to the steep rate of decline recorded at the start of the year. The month-on-month index for Germany picked up from 44.4 in March to 48.9.



France registered only a marginal decline in sales that was the weakest among the three countries covered, as has been the case throughout much of the past year. The month-on-month index rose from 45.7 to 49.2, indicating the smallest decline for three months.