Germany posted its first monthly trade deficit since 1991 amid rising inflation and supply chain disruption weighing on the country’s industrial base.
Figures from the country’s statistics agency show a jump in the value of imports and a modest drop in exports pushed Europe’s biggest economy to a trade deficit of €1bn (£860m) in May.
The monthly deficit is the country’s first since German reunification in the year, according to Bloomberg.
Exports fell in May by 0.5% from the previous month to 125.8 billion euros, while imports rose 2.7% to 126.7 billion euros, more than expected by City economists. Compared to the same month of the previous year, exports increased by almost 12%, while the value of imports increased by almost 30%.
Germany’s dominant manufacturing base has faced disruptions from global supply chain problems caused by the pandemic and the lockdown in China. Rising energy prices and weaker demand for commodities are also hitting demand.
Figures released on Friday showed manufacturing output in the euro zone fell in June for the first time since the depth of the initial lockdowns in 2020, in a sign of worsening economic conditions across the single currency bloc.
Prices of imports such as energy, food and industrial components rose more than 30 percent in May from a year ago, according to the latest trade data, while export prices rose at about half the rate.
The figures come amid Russia’s war in Ukraine, which has pushed up energy prices across Europe, pushing up inflation and affecting the trade balance of countries dependent on oil and gas imports for much of their energy needs.
The UK’s current account deficit, which measures cross-border trade and financial flows, jumped in the first quarter of this year to the highest level since records began in the 1950s. While this is largely due to soaring fuel import costs, it also comes as many British exporters grapple with Brexit disruption due to border issues and red tape.
By contrast, Russia’s current account surplus more than tripled in the first four months of the year, reaching its highest level since at least 1994. The increase is due to skyrocketing gas prices, boosting the value of exports, and Western sanctions leading to a drop in imports.
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German exports to Russia fell by almost 60% in March after the invasion of Ukraine and fell again by almost 10% in April. Exports recovered on a monthly basis for the first time in May, rising almost 30% to reach €1 billion. German imports from Russia fell by 9.8% to 3.3 billion euros.
Klaus Vistesen, chief eurozone economist at consultancy Pantheon Macroeconomics, said a sharp slowdown in Russian gas supplies to Germany would reduce the volume of imports, but that the value would increase as the overall price of energy rises.
“Germany’s trade surplus has already evaporated, thanks mainly to rising imports, offsetting the otherwise decent momentum in exports,” he said. “Looking ahead, we suspect the external balance will remain in deficit through the summer.”
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