Economy in Germany is like a well-oiled machine

GERMAN imports soared more than expected in January, outperforming an equally surprisingly strong rise in exports, data showed on Friday, in a further sign that Europe’s biggest economy was firing on all cylinders at the start of 2017.

The figures, released by the Federal Statistics Office, also showed the wider current account surplus fell sharply on the month, suggesting that Germany’s vibrant domestic demand is helping to re-balance its traditionally export-driven economy.

“After their lacklustre performance in the past year, exports are rebounding in 2017,” DIHK economist Volker Treier said, adding demand from emerging markets such as China, Brazil, Russia and India was rising.

Seasonally adjusted imports rose by 3.0 percent on the month, while exports increased by 2.7 percent, the data showed.

Both figures came in much stronger than expected.

A Reuters poll had forecast imports to rise by 0.5 percent and exports to increase by 1.85 percent.

The seasonally adjusted trade surplus edged up to €18.5 billion (about $19.6bn) from €18.3bn in December. The January reading was above the Reuters consensus forecast of €18.0bn.

The wider current account surplus plunged to €12.8bn after a revised €24.8bn in December, the data showed.

In 2016, German exports rose 1.2 percent on the year to hit a record €1.2bn, while imports edged up 0.6 percent to reach an all-time high at €955bn.

This propelled the German trade surplus to €252.9bn, also a record high.

The European Commission and the International Monetary Fund (IMF) have repeatedly urged Germany to take advantage of record-low borrowing costs and increase investment as a measure to reduce the country’s large trade and current account surpluses.

The US last year flagged concerns over economic policies in Germany and put Europe’s biggest economy on a new monitoring list together with other countries such as China and Japan, mostly due to their large surpluses.

US President Donald Trump’s trade adviser this week described the US trade deficit with Germany as “one of the most difficult” issues, calling for bilateral discussions to reduce it outside of EU restrictions.

Peter Navarro’s comments followed his complaints that Germany was exploiting a weak euro to gain a trade advantage.

The criticism was firmly rejected by Finance Minister Wolfgang Schaeuble, who said Germany’s trade surplus was the result of high demand for its products and this had nothing to do with any form of currency manipulation.

The war of words has set the stage for a heated debate on trade and tax policies when G20 decision-makers meet in the German town of Badenbaden next week. – Reuters