German trade surplus hits record high

German exports rose at their fastest pace this year in May and the trade surplus hit a record high, boosting expectations that Europe's largest economy will pull off stronger growth in the second quarter after expanding modestly in the first. Seasonally adjusted exports climbed unexpectedly by 1.7 percent on the month while imports increased by 0.4 percent, widening the trade surplus to 22.8 billion euros, its highest since the data was first collected in 1991, figures from the Federal Statistics Office showed on Thursday.
Economists polled by Reuters had expected exports to slip by 0.8 percent and imports to rise by 0.9 percent. "All in all this fits into the picture that the economy was growing strongly in the second quarter," said Carsten Brzeski, an economist at ING. He said the pick-up seen in monthly export data since the start of the year was the result of the weaker euro but added that it was still unclear how the uncertainty related to the Greek crisis would affect the economy in June.
The German economy lost steam in the first quarter, with growth slowing to 0.3 percent as foreign trade dragged, but it is expected to have expanded by about 0.5 percent between April and June. Economists said it was likely that foreign trade would make a contribution to second-quarter gross domestic product growth. "The implication is that the trade in goods data are pointing to a huge net trade contribution to Q2 GDP of around 5 percentage points annualised," said Greg Fuzesi, an economist at J.P. Morgan.
Nonetheless, private consumption is expected to continue to drive growth this year as consumers benefit from high employment, wage hikes and low inflation, while record-low interest rates give Germans little incentive to save. The trade data provided some encouragement after figures earlier this week showed industrial output stagnated in May while orders fell slightly. Forward-looking surveys tracking the mood among businesses, investors and consumers have taken a turn for the worse due to the Greek crisis.
An unadjusted breakdown of trade data showed shipments to the euro zone rose by 5.1 percent in May compared with a year ago, while Germany sent 2.3 percent more goods to countries outside the European Union. Exports to countries within the EU that do not use the euro such as Britain and Sweden posted an 8.2 percent gain.