German Exports February 2008

German exports remained unchanged from January in February, suggesting that Europe's largest economy continues to resist the force of the global slowdown and the rise in the euro, but that adding export on top of export may be getting harder and harder to do. Even more to the point, a change in the distribution of German exports is taking place on the margin, since while the pace of expansion to EU countries slowed from 7.7% in January to 6.7% in February, the pace of expansion to non EU countries (and we could think here in particular of Russia perhaps) rose from 11.5% in January to 13.5% in February. So rising demand in Russia (and to a lesser extent China) is making up for declining demand from Spain and Italy as their economies slow. This is now a delicate balancing act, and we will need to watch carefully what happens in March and April.


German sales abroad, when adjusted for working days and seasonal changes, were unchanged from January, when they rose 3.6 percent, the Federal Statistics Office in Wiesbaden said today. Imports were down a seasonally adjusted 0.4% from January, reflecting the fact that internal demand in Gemany could hardly be called "vibrant" at the present time. Exports rose 9 percent year on year, while imports were up 7%.




Germany exported goods to the value of EUR 84.6 billion and imported goods to the value of EUR 67.7 billion in February 2008. The foreign trade balance was in surplus by EUR 16.9 billion. In February 2007, the surplus was EUR 14.3 billion.




According to provisional results from the Deutsche Bundesbank, the German current account showed a surplus of EUR 15.4 billion in February 2008, which included the balance of services (EUR –0.0 billion), factor income (net) (EUR +4.2 billion), current transfers (EUR –5.0 billion) and supplementary trade items (EUR –0.6 billion). In February 2007, the German current account showed a surplus of EUR 11.4 billion.

In February 2008, Germany sold goods to the value of EUR 54.7 billion to the Member States of the European Union, while it received goods to the value of EUR 44.1 billion from those countries. Compared with February 2007, dispatches to and arrivals from the EU countries increased by 6.7% and 9.1%, respectively. Goods to the value of EUR 36.3 billion (+5.6%) were dispatched to the euro area countries in February 2008, while the value of goods received from those countries was EUR 30.7 billion (+8.6%). Goods to the value of EUR 18.3 billion (+9.1%) were dispatched to EU countries not belonging to the euro area in February 2008, while the value of the goods which arrived from those countries was EUR 13.4 billion (+10.2%).

Germany exported goods to the value of EUR 30.0 billion to and imported goods to the value of EUR 23.6 billion from countries outside the European Union (third countries) in February 2008. Compared with February 2007, exports to third countries were up by 13.5% and imports from those countries by 3.3%.

German Industrial Production February 2008

German industrial production rose again in February, for its third monthly gain in as many months, as manufacturing output continued to hold up and unusually warm temperatures boosted construction. Output rose a seasonally adjusted 0.4 percent from January, when it gained 1.4 percent, the Economy Ministry in Berlin said today. Year on year total industrial production was up 6.1 percent when adjusted for the number of working days.



Construction output rose 3.7 percent in February from the previous month, today's report showed. Manufacturing production increased 0.3 percent and output of semi-finished goods rose 1.6 percent. Investment goods production declined 0.2 percent. January's gain in output was revised down from 1.8 percent. Relatively mild weather has allowed construction companies to work during much of the winter. At 3.6 degrees Celsius the average temperature in February was 3.3 degrees higher than the long-term average, according to the Offenbach-based German weather service DWD.



In a two-month comparison, which smoothes out monthly volatility, industrial production increased 2.4 percent in January and February from the previous two-month period.

German industry still seems to be working off the huge batch of orders which built up during the fourth quarter, but more than likely we'll see a slowdown over the coming months as global demand is cooling an the euro remains strong. As a possible early warning of this factory orders fell 0.5 percent in February, a government report showed last week, while the International Monetary Fund has cut its 2008 outlook for economic growth in Germany to 1.4 percent from 1.5 percent.

German Services PMI and EU Economic Sentiment Indicator March 2008

European services growth slowed in March after the euro rose to a record and the U.S. economic downturn deepened. Royal Bank of Scotland Group Plc said its index of growth in service industries from banks to airlines fell to 51.6 from 52.3 in February. That's lower than an initial estimate of 51.7 published March 20. The index is based on a survey of purchasing managers and a reading above 50 indicates expansion.

In Germany, Europe's largest economy, services growth slowed, with the index dropping to 51.8 from 52.2 in February. Still German services continue to expand, and this gives us yet another measure of the extent to which the German economy - for the time being - continues to resist.




As for the details, new business grew more slowly, as did net hiring. Tim Moore, an economist at NTC, said that on average, figures for the first quarter pointed to the weakest growth in the German service sector in four and a half years.

"With activity growth slowing, and backlogs of work falling for a fourth month running, job creation came under pressure in March and was the weakest since October 2006," he said.

Business expectations among German service firms dipped to their lowest level in four months, registering a level of 50.3, as the mood among financial intermediaries hit a record low.

"There were divergent trends across the service economy, with new work rising at a solid pace at firms operating in renting and business activities, but contracting markedly in the financial intermediation sector," NTC said.

The most optimistic companies were those operating in the hospitality, transport and storage sectors.

The European Commission has also now reported its eurozone “economic sentiment” indicator for March, with the composite number bouncing back a little from the February reading which its lowest level since December 2005. The indicator, which gauges optimism across all economic sectors and is regarded as a good guide to likely future trends, was back up to 102 after falling to 100.1 in February from 101.7 in January. As we can see in some of the counries shown in the chart below, the picture is a mixed one, with Germany for the time being holding reasonably stable, climbing back to 104 from 103.7 in February (France is also holding up fairly well at 105.6, from 105.2 in February), Ireland hovering, Italy continuing its steady downward path, and Spain continuing to head steadily off the map. The March reading in Spain was 83.9 which was down from 87.5 in February. I suppose here it is a case of how low can you go before you hit bottom. Yet awhile I suspect.