Exports soar as economy surges ahead

Germany's powerful export machine cranked into high gear in June, official data showed on Monday, likely driving growth across much of Europe as the continent's biggest economy thundered ahead.

Exports soar as economy surges ahead
Photo: DPA

Analysts said the strong figures bode well for German second quarter growth data due Friday and, given the knock-on effect, should help counter complaints that Germany’s focus on exports crowds out less competitive neighbours.

The June trade surplus of €14.1 billion ($18.7 billion) was up 44 percent from May as exports rocketed 28.5 percent from a year earlier to €86.5 billion, close to a record high set in October 2008.

“This has improved (the) chances of the German economy having grown more rapidly in the second quarter than previously assumed,” Commerzbank analyst Simon Junker said.

“The German economy is bound to see its strongest quarterly growth rate since reunification” in October 1990, ING senior economist Carsten Brzeski added.

Germany, the world’s second biggest exporter after China, suffered its worst post-war recession last year but has bounced back as growing economies snap up German goods.

On the imports side, the picture was even stronger – good for Germany and its European trading partners whose economies benefit in the German slipstream.

Imports soared 31.7 percent to €72.4 billion, the Destatis statistics office said, the all-time record since figures were first compiled in 1950. For the first half of 2010, the trade surplus jumped 26 percent from the same period a year earlier to €74.6 billion, Destatis said.

“We’re seeing Germany doing better than the others right now but to some extent this is also because it did worse than the others in 2009,” Deutsche Bank senior European economist Gilles Moec told AFP.

Since then, exports have picked up markedly, in particular to Asia which puts a high value on German machine tools, autos and chemicals.

“Exports are doing so well that they are helping to produce more jobs and more wages in Europe and this in turn is producing more domestic demand,” Moec said.

Berlin has been criticised by France and others for not boosting domestic consumption and relying on exports for economic growth but Moec pointed out that household savings rates in Germany were actually lower than in France, Italy or Spain.

“This debate really needs to stop,” the French economist said.

Chancellor Angela Merkel has been dubbed “Madame Non” by some for her perceived reluctance to spend heavily on promoting domestic consumption but that is not an accurate picture.

“Germany is the only European country which is actually adding to the stimulus in 2010,” Moec countered.

Germany’s diversified industrial supplier base means exports often have parts sourced from companies in central or eastern Europe, and also in Spain, he noted.

“If Germany does well, this seems to have a very nice second-round effect on Spanish exports,” Moec said.

Europe’s economy should thus again get support from Germany before a forecast slowdown later this year.

“Though overall economic conditions remain good, it seems the best days are coming to an end,” Commerzbank economist Ralph Solveen cautioned.

In the meantime, manufacturers have well-stocked order books and their contribution to European growth will be welcome.

European Central Bank president Jean-Claude Trichet said on Thursday that second- and third-quarter figures “are likely to be better than we had anticipated.

“We are now … in a situation which is obviously better than before,” he said before quickly adding: “I don’t declare victory, we remain cautious.”

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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.