German trade surplus shrinks to 12-month low

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Germany’s bumper trade surplus – long a scourge of the country’s economic critics – has shrunk to its lowest level in a year on the back of a sharp climb in imports at the start of the year.

The country’s trade balance – a measure of the difference between its imports and exports – fell from €18.7bn to €14.8bn in January compared to December – a far steeper drop than the €18bn forecast by economists ahead of the release.

A shrinking surplus was driven by a 3 per cent rise in monthly imports, while exports also bounced back from a 2.8 per cent decline to rise by 2.7 per cent. With the exception of last November, the rise in imports was the best month since 2014.

Still on a year on year measure, the surplus still rose 12 per cent compared to January 2016, with exports climbing 12 per cent, said Destatis.

Higher imports are a sign that consumer demand in Europe’s largest economy has got off to a robust start to the year, having helped power the German economy over recent years. It should also help allay concerns voiced by advisors in the new White House administration that Germany has a dangerously preponderant trade balance with the rest of the world.

The country’s current account balance – a measure of its external balance in trade and income – also shrunk more than expected, falling by nearly a half from €24.8bn to €12.8bn. Overall, the current account surplus is expected to hit an all-time record of 8 per cent at the end of 2016.

Peter Navarro, the new US trade adviser, has accused Berlin of exploiting a “grossly undervalued” exchange rate to gain advantage over its major trading rivals. A weak currency helps boost exporters.

But the German government, EU and European Central Bank have all fiercely rejected the criticism. Yesterday, ECB chief Mario Draghi said there was “no merit” in criticising Berlin as the value of the euro was determined by the markets rather than being controlled by Berlin or Frankfurt.

Charts via Bloomberg

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