March exports increased by 0.9% month-on-month, from -2% MoM in February. At the same time, imports increased by 0.3% MoM, from 3.2% MoM in February, widening the trade balance to €22.2bn from €21.4bn in February. Don't forget that this is in nominal terms and not corrected for high inflation. While March trade data provided a nice confirmation of the German economy's return to growth in the first quarter, industrial orders spoiled the party of optimism, dropping by 0.4% MoM in March from a downwardly revised -0.8% MoM in February.
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ING analysts say that net exports have returned as an important growth driver. Interestingly, German trade is experiencing shifts in global trade and geopolitical tensions. 'The share of exports to the US increased to more than 10% of total exports in 2023, while the share of exports to China dropped to 6%, significantly below pre-pandemic levels. At the same time, Germany exported more to Poland, the Czech Republic and Hungary than to the US. However, banking on a return of the well-known success formula of the export-oriented growth model would be deceptive. The long list of geopolitical risks, potential trade tensions and increasing global competition should provide sufficient arguments against policy complacency. The German economic business model still needs to be much more balanced.'
According to these analysts, 'To some extent, industrial orders this morning illustrated the high risk that the revival of the export-oriented success formula is only short-lived. In fact, after the first post-lockdown recovery, demand for German manufacturing goods has been weak. In fact, since the start of 2022, industrial orders have dropped on average by 0.5% every month.'
According to ifo analysts, in April, 39.5% of manufacturing companies reported a lack of orders, up from 36.9% in January. In the service sector, the proportion rose from 32.1% to 32.4%. 'The lack of orders is hampering economic development in Germany,' says Klaus Wohlrabe, Head of Surveys at ifo. 'Almost all industries are affected.'
In manufacturing, energy-intensive industries are the hardest hit. In the paper industry, the proportion is 53.9%, in basic metals manufacturing it is 50.6%, and in the chemical industry it is 46.6%. On the other hand, only a few beverage manufacturers mention a lack of orders (14.3%).
More information:
ING
www.think.ing.com
ifo
www.ifo.de
