FX.co ★ German Trade Surplus Rises On Robust Rebound In Exports

Germany saw a significant growth in its trade surplus at the beginning of the year as exports rebounded significantly, providing a much-needed boost to its faltering economy.

Data released by Destatis demonstrated a 6.3% increase in exports for January, marking an impressive recovery from a 4.5% fall in the previous month. This growth far exceeded economists' predictions of a modest 1.5% rise. At the same time, imports also saw an upturn of 3.6% in comparison to a substantial reduction of 6.7% in December. Experts had anticipated a moderate 1.8% climb.

The considerable boost in exports resulted in the trade surplus moving up to EUR 27.5 billion from EUR 23.3 billion in December, surpassing the expected EUR 21.5 billion. In terms of annual performance, the growth in exports reached 1.5% following a 9.1% decline a month earlier. The year-on-year decrease in imports similarly decelerated to 7.5% from a high of 15.2% in December.

With no adjustments, the foreign trade balance showed a surplus of EUR 22.6 billion in January, nearly double the EUR 11.7 billion surplus from the same period the previous year.

The United States accounted for the majority of Germany's exports, albeit with a slight decrease of 1.7% from December. However, exports to China saw a robust growth of 7.8%. On the flip side, Germany's principal source of imports was China, showing an 11.1% drop, while imports from the U.S dropped by 5.2%.

According to the Purchasing Managers' survey, Germany's construction sector remained in a significant contraction throughout February. This downward trend has been in motion since April 2022 with the Purchasing Managers’ Index moving up slightly to a five-month high of 39.1 in February from 36.3 in January.

The ifo Institute released its spring forecast on Wednesday; indicating that high interest rates and government fiscal policies are posing challenges to Germany's economic recovery. As a result, the growth estimate for this year has been cut from 0.9% to a meager 0.2%. Despite this, optimism remains for 2025, with growth predictions moving up to 1.5% from 1.3%.

In related news, the Kiel Institute revised down its economic projections, stating that recovery from the current economic slump would take longer than expected, with only a moderate improvement anticipated for later this year. It predicted a growth rate of 0.1% for this year and a somewhat better 1.2% for 2025, after lowering the estimate for 2024 from 0.9%.