German trade balance continues to narrow

German imports and exports pushed higher in August, official data showed on Wednesday, trimming the trade surplus by more than expected.

According to Destatis, the Federal Statistical Office, German exports rose by 1.6% month-on-month in August on a calendar and seasonally-adjusted basis, compared to a revised 1.6% fall in July.

Imports rose by 3.4% on the same basis, compared to July’s 0.1% rise, following a 4.2% month-on-month jump in imports from non-European Union countries. Oxford Economics said the increase in non-EU imports was "likely driven by elevated commodity energy prices".

Analysts had expected both exports and imports to increase, but at a slower pace of 1.1% each.

The seasonally-adjusted trade surplus fell to €1.2bn, from a revised €3.4bn in July and compared to €13.7bn in August 2021. Analysts had pencilled in a surplus of around €4bn.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "A leap in imports once again weighed on nominal net trade in the Eurozone’s largest economy midway through the third quarter.

"Early data for the third quarter point to another fall in net trade, due mainly to weakness in goods exports, but note that this story can still change significantly with the release of the September data, and revisions for August. In addition, the services component is a huge wildcard."

Carsten Brzeski, global head of macro at ING, noted: "The war in Ukraine has succeeded in delivery what nothing else had managed before: letting the notorious German trade surplus disappear. However, it is not a ‘good’ disappearing, driven by stronger domestic demand, but rather a ‘bad’ disappearing, driven by high energy prices and structurally weaker exports.

"Export order books have weakened significantly in recent months as the global economic slowdown, high inflation and high uncertainty leave clear marks on (not only) German exports."