German exporters should send thank-you to ECB

FOR AN idea of how much Germany is benefiting from a weaker euro, take a look at the trade data for the country that was published yesterday.

As exports outpaced imports in July, the trade surplus rose to a record € 25 billion (R388bn), topping the previous high of € 24.1bn set in June. Moreover, aggregate figures for 2015 so far show where the growth in demand is coming from – outside the euro area.

German sales to EU countries outside the currency bloc in the seven months through July were 8.3 percent higher than in the same period in 2014. Shipments to non-EU nations increased 7.9 percent. Exports within the euro area gained just 4.8 percent. That doesn’t come from nowhere.

The single currency has fallen more than 7 percent against the dollar this year, 6 percent against the pound and 5 percent against the yuan, even with the Chinese currency’s surprise devaluation. A cheaper euro makes prices of the region’s goods more competitive and Germany, as the bloc’s largest economy and exporter, is well-positioned to benefit.

The euro’s decline can be attributed, at least in part, to the European Central Bank (ECB) under president Mario Draghi, as it pushes ahead with unprecedented monetary stimulus intended to revive inflation. With China’s economic slowdown threatening to curb emerging market demand and a pending US interest rate increase posing a risk to global growth, German manufacturers should be grateful for the tailwind.

“German exporters should send a thank-you letter to Draghi,” Carsten Brzeski, the chief economist at ING Diba, said. “Notwithstanding the excellent quality and product specialisation of German exporters, the weak euro has clearly been a very special stimulus package.” – Bloomberg