German exports fell 0.5% in May 2022, while imports rose 2.7% on a calendar and seasonally adjusted basis. According to preliminary data from the Federal Statistical Office (Destatis), exports increased 11.7% and imports increased 27.8% over that in May 2021. Exports to the Russian Federation increased 29.4% to EUR1.0 billion in May 2022 over that in April 2022, after falling nearly 60% in March 2022 over that in February 2022 and 9.9% in April 2022 over that in March 2022. The exports were 54.6% lower than those in May 2021. Imports from Russia fell 9.8% to EUR3.3 billion in May 2022 in comparison to that in April 2022. Between 2010-2021, the consumer price inflation in Germany was highest in the year 2021, reaching 3.1%. Germany reported a sharp decline in the inflation rate between 2018-2020.
Sanctions on Russia to Blame?
Germany's widening trade deficit was partly due to increasing prices of energy owing to Russia’s invasion of Ukraine. As a result, the value of imports from Russia and other suppliers of energy increased, while German exports to Russia fell sharply as a result of Western sanctions. According to Destatis, German imports from Russia increased 54.5% YoY in the five months up to May, while exports decreased 29.8%.
Exports to US and China
Germany's trade surplus with the US grew, with exports increasing by more than a fifth between January and May 2022. After Beijing's no-COVID policy clouded China's economic prospects earlier in 2022, many German exporters increased their focus on the US market. On the contrary, Germany's trade deficit with China increased in 2022. Imports from the world's second-largest economy increased 35% in May in comparison to that in January, while German exports to China remained unchanged.
Trade Surplus – A Worrying Sign
Some of the major trading partners of Germany were dissatisfied with its long-running surplus, considering it as evidence that the country was not doing enough to support domestic demand and relying on foreign buyers instead. Political leaders are concerned that persistent trade deficits will result in job losses as goods consumed by households are manufactured elsewhere.
Outlook
The data released is a powerful illustration of Germany's problems, as the country’s reliance on Russian energy became evident due to the war. The deficit is expected to grow in June as a result of a 60% reduction in Russian gas supplies, which forced importers to cover their obligations by making spot market purchases at higher prices. Nonetheless, the outlook for exports appears bleak as the global economy slows down and fears of recession grow in the US and Europe.
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