Group Economics
Eurozone Watch
Macro & Financial Markets Research
7 April 2016
Germany’s exports in dire straits • Aline Schuiling Senior Economist Tel: +31 20 343 5606
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aline.schuiling@nl.abnamro.com
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The volume of Germany’s exports declined in the final quarter of last year - the first quarterly drop since the end of 2012 Exports to the US, UK and Asia ex-China slowed down the sharpest during the course of last year This reflects slower demand and a stronger euro We expect a weak first half of this year, followed by a modest improvement in the second half of the year
Drag of exports on GDP growth largest since the eurozone crisis The details of Germany’s GDP data showed that the volume of exports declined by 0.6% qoq in 2015Q4. This was the first contraction since 2012Q4, when the eurozone was in recession. As the volume of Germany’s imports continued to expand on the back of robust domestic demand, net exports shaved 0.5 percentage points off GDP growth in the final quarter of last year. This drag to growth also was the largest since the final quarter of 2012. Germany: GDP growth and export growth % qoq
2 1 0 -1 -2 2012
2013 G
2014
2015
Source: Thomson Reuters Datastream, ABN Amro Group Economics
By far the most of Germany’s exports go to Europe … Monthly trade data had already signalled that Germany’s exports were contracting in the final months of last year. Although price and exchange rate changes have an impact on the value of monthly trade, which is generally very volatile, the data still provides some insight into which countries or regions were mainly responsible for the slowdown in export growth. Almost 70% of Germany’s exports are to other European
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Eurozone Watch – German ny’s exports in n dire straits – 7 April 2016
countrries (of which more than half to the eurozone and 8% too the UK). The e share of the US S is around 10 0% and the sh hare of Asia arround 17%, off which 6% Ch hina. Finally, a few years ago Ru ssia also had a significant share s in Germ many’s exports, but this has ha alved from aro ound 4% in 20 012 to some 2% % in 2015, whhich now is rou ughly compa arable to the sshare of Latin America. Share in German n exports, ma ain countries and regions % (20 015)
40 35 30 25 20 15 10 5 0
Source: Thomson Reuterrs Datastream, AB BN Amro Group Economics
… butt the slowdow wn was largely due to cou untries outsid de Europe Germa any’s exports decelerated markedly m in the e second half of last year. The T sharpe est deceleratio on (growth in H2 2015 comp pared to grow wth in H1) was in exports to the US, the UK a and Asia ex-Ch hina. Part of th his probably iss related to the e waning of ositive impact o of the depreciation of the eu uro versus thee USD and GB BP in the the po second half of 2014 4. But the slow wdown in grow wth of domesticc demand in th he US and UK in the 2015H2 p probably playe ed a dominant role. The slow wdown in expo orts to Asia ex-China probably w was partly exc change rate re elated and part rtly demand drriven as well. The T euro depre eciated on ave erage by arou und 10% againnst a wide group of Asian curren ncies in 2014 a and subseque ently appreciatted somewhatt in 2015. Mea anwhile, econo omic growth in most Asian countries c lost some s momenttum during las st year. Export growth, s selected coun ntries and reg gions % h-o o-h
15 5 10 0 5 0 -5 5 -10 0 EZ
UK
Rest Europe
2015H1
US
China
Rest Asia
2015H2
Source: Thomson Reuterrs Datastream, AB BN Amro Group Economics
LatAm m
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Eurozone Watch – German ny’s exports in n dire straits – 7 April 2016
Weak start to this year … We ex xpect German y’s exports to have remaine ed weak in thee first half of th his year. The global economyy and world tra ade probably lost momentuum in the first months m of this ye ear, when eco onomic confide ence and the business b climaate were hit by y turmoil in financ cial markets an nd worries abo out emerging markets m and tthe global economy in genera al. The global manufacturing PMI fell from m close to 51 iin the final mo onths of 2015 to t 50 in Febru uary 2016, which is the lowe est level since the end of 2012. It improv ved slightly in March, but re emained well below b the leveels of October--December 2015. Germany’s m manufacturing PMI fell sharply during the ffirst quarter off this year as well, while the ne ew export orde ers componen nt dropped thee most and fell back to close to 50 in March h, down from 53.5 5 in Decem mber 2015. Germ many: Manuffacturing PMII and New exp port orders index
60 55 50 45 1 13
14
15
16
Manufacturing PMII, Output M M Manufacturing PMII, New export ordeers Source: Thomson Reuterrs Datastream, AB BN Amro Group Economics
… but moderate m gro owth expected d in second half h of the yeaar We expe ect Germany’’s exports to regain r some sttrength duringg the course of this year. The ECB’s policy eassing package of o March and the t fact that thhe Fed has po ostponed further interest rate hiikes following its hike of Dec cember 2015,, have already y helped support market sentim ment and have e eased worrie es about the hhealth of the global econom my. We expect further policy easing by EC CB, while the F Fed and BoE are a expected to keep poli cy on hold this s year. Togeth her with a graddual rise in oil prices, these ce entral bank acctions should help h to further improve markket sentiment and support the global eco onomy. That said, s global growth is expeccted to remain sub-trend and grow wth in German ny’s main exp port markets is s expected to sstrengthen mo odestly. On top of th hat, exports wiill not be supp ported by the euro e exchangee rate. The tra adeweighted exchange ra ate of the euro o has apprecia ated by aroundd 4% since the e end of Novemb ber 2015 and iis expected to o remain close e to the currentt levels. Cons sequently, we expe ect only a mod dest improvem ment in Germany’s exports inn the second half of this year.
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Eurozone W Watch – German ny’s exports in n dire straits – 7 April 2016
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