Picture Alliance | Picture Alliance | Getty Images Germany no longer exports more than it buys from other countries, underscoring the pressures facing the nation and other European economies from rising energy and food prices. Data released on Monday showed that in May, Germany ran a foreign trade deficit of 1 billion euros ($1.03 billion). This is an important moment for the German economy, which had reported trade surpluses for several decades. Bloomberg reported that 1991 was the last time the country reported a monthly trade deficit. Its high level of exports has been a major economic driver, and the trade surplus has come under attack even by former President Donald Trump, who wants Americans to buy more American-made goods. “Germany’s famous trade surplus has disappeared,” Carl Weinberg, chief economist at High Frequency Economics, said in a note on Tuesday, adding that “higher prices for energy, food and materials imports are pushing up the import bill.” Germany’s exports in May were still 11.7% higher than a year earlier, according to the country’s statistics office, although down 0.5% from the previous month. However, the import bill increased by 27.8% from a year ago and was no longer offset by its overseas sales. Germany — like many other European nations — is paying more for energy and food, particularly after Russia’s invasion of Ukraine. Russia, Europe’s main energy exporter, has cut gas flows to the bloc, bringing new uncertainties to the energy market and pushing up prices. In addition, Ukraine, a major exporter of wheat and other food-related items, was unable to ship its products abroad at the same rate as before the war. Farmers also cannot sow and plant at the same rate as before – potentially driving up food prices when harvest time comes.
shrinking GDP?
The latest figures come at a time when more and more economists are talking of a recession in Europe within the next 12 months. In fact, the euro fell to a two-decade low against the US dollar on Tuesday morning as more investors priced in a greater chance of economic turmoil down the line. Chris Scicluna and Emily Nicol, two economists at Daiwa Capital, said Germany’s first trade deficit since 1991 reflected price swings and continued export weakness. “With the annual growth rate of German import prices in May (30.6%Y/Y) almost double the rate of export prices (15.9%Y/Y), Germany’s trade balance was always bound to deteriorate “, they said in a survey. note Monday. “However, adjusting for shifts in relative prices, continued weakness in export volumes, partly related to supply constraints, also played a role.” They added that the data suggest there is a “strong possibility” that net trade took a bite out of Germany’s economic growth in the second quarter, “adding to the risks that German GDP shrank last quarter.”
