Friday, February 08, 2008

German Exports December 2007

German exports fell for the second month in succession in December, offering us a clear sign that growth in Europe's largest economy is about to slow significantly.

Sales abroad, adjusted for working days and seasonal changes, fell 1.2 percent from November, when they declined 0.5 percent, the Federal Statistics Office in Wiesbaden said today. Equally importantly, the year on year growth in exports fell to zero in December (when compared with December 2006). Today's report suggests that the surge in the euro, which makes exports less competitive abroad, is hitting manufacturers in Germany just as the U.S. economy hovers on the point of recesession.

In the year, exports were unchanged and imports rose 0.1 percent, today's report showed. Imports rose 5.3 percent from November. The trade surplus narrowed to 10.8 billion euros ($15.6 billion) from 19.5 billion euros. In 2007, the surplus was 198.8billion euros, up from 159 billion euros in the previous year.

A number of indicators on the export front are giving a clear warning of the problem which is arriving. The first of these would be the year on year chart for the rate of export growth. How anyone can look at the slope of this line and say that recent events in Europe and globally have had no effect on the German economy I simply don't know.

Now it is important at this point to get hold of the idea that Germany is a high median population age society, and cannot fall back on domestic demand in times of trouble, since this is now as congenitally weak as I am congenitally hard of hearing.

Basically German GDP growth no tracks exports growth - or perhaps better put - export surplus growth, as the above chart indicates. If we look what happened to GDP growth after export growth collapsed in 2000, we can perhaps get the best idea of what is about to happen next in Germany. I think the part of the picture many people simply aren't getting at present is the implication of being export dependent.

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