German exports surge to record level in June, outlook still gloomy

The value of German exports jumped by 4.5 per cent in June to hit a record level, though economists cautioned that much of the increase was likely due to soaring prices.

Exports rose for a third month in a row, beating forecasts for a 1 per cent increase and pushing Germany’s seasonally adjusted trade surplus to 6.4 billion euros ($6.51 billion) in June, well above consensus for a 2.7 billion euro surplus.

Preliminary data last month had shown Germany posting its first trade deficit in more than 30 years, but the May figure of -1.0 billion euros was revised on Wednesday to a surplus of 0.8 billion euros.

“These figures should be taken with a grain of salt,” Thomas Gitzel of VP Bank said, saying that price increases could increase nominal export volumes without more goods actually having been exported.

“Adjusted for prices, little is likely to remain of the export growth.”

The German economy stagnated in the second quarter, with the war in Ukraine, the pandemic and supply disruptions bringing Europe’s largest economy to the edge of a downturn.

The Association of German Chambers of Industry and Commerce (DIHK) warned that Germany’s export-reliant industry faced a difficult second half of the year.

“Supply chain disruptions and high costs for energy, raw materials and imported inputs continue to hamper production,” said DIHK foreign trade expert Carolin Herweg.

“Also, the cooling of the economies of important export partners, such as the United States, China or the eurozone, is also dampening demand for products ‘Made in Germany’.”

Exports to the United States, Germany’s biggest exports market, rose by 6.2 per cent in June compared with May, while those to European Union member states were up by 3.9 per cent.

Exports to China edged up by 2.4 per cent in June.

June imports to Germany increased by 0.2 per cent on the previous month in calendar- and seasonally-adjusted terms, the federal statistics office said. Analysts polled by Reuters had pointed to a month-on-month increase of 1.3 per cent.

Services sector: Germany’s services sector saw its six-month expansion come to an end in July as higher prices and growing concerns over gas supplies put the brakes on a post-lockdown rebound, a survey showed on Wednesday.

S&P Global’s final services Purchasing Managers’ Index (PMI) fell to a final reading of 49.7 in July from 52.4 the previous month. That was slightly above a flash estimate of 49.2.

Higher energy bills and rising wages were noted by surveyed firms as having an influence on the strong cost pressures, though the rate of overall operating expenses ticked down in July and was at its lowest level since February.

“Service providers’ expectations for future activity turned negative for the first time in over two years in July, reflecting signs of already-weakened demand as well as growing concerns about a potential gas shortage in the country,” said Phil Smith, Economic Associate Director at S&P Global.

A stagnation in German economic growth in the second quarter and PMI data showing services and manufacturing activity in contraction in July bode ill for the third quarter, he added.

The final composite PMI, which tracks both the manufacturing and services sectors that together account for more than two-thirds of the German economy, fell to a final reading of 48.1, from 51.3 the month before.

It was the first time since December that the reading has fallen below the 50 mark separating growth from contraction.

Meanwhile the local utilities in Germany are taking various measures to replace scarce gas with other energy sources in the coming winter amid concerns that already reduced Russian gas imports may run dry.

There are around 900 such companies, called Stadtwerke, which distribute two-thirds of all gas among many other activities in power, water, heat, waste and broadband.

The companies have been purchasing gas at very high prices which they expect to pass on to consumers through planned gas levies from October.

Germany’s biggest local utility has postponed switching from coal to gas at one of its combined heat and power plants and reactivated previously-shut oil burners at two heating plants. It is also investing in district heating in the city.

“Together with the expansion of renewable heat generation, the dependence on fossil energies and difficult supply situations should also be reduced in the heating sector,” it said.