Europe News

Germany's trade surplus shrinks for the first time since 2009

Key Points
  • Vibrant domestic demand sucks in more imports.
  • Good news for Merkel, data helps defuse criticism.
German Chancellor Angela Merkel speaks at the headquarters of SPD for preliminary coalition talks on January 7, 2017.
Sean Gallup | Getty Images

Germany's trade surplus last year fell for the first time since 2009, data showed on Thursday, in a further sign that vibrant domestic demand is sucking in more imports and slowly re-balancing the country's export-oriented economy.

Chancellor Angela Merkel has come in for criticism from U.S. President Donald Trump's administration for Berlin's large trade surplus with the United States, while scepticism towards free trade is mounting in some poorer euro zone countries.

International Monetary Fund chief Christine Lagarde has also urged Germany to increase domestic spending and boost imports, warning that the build-up of large current account surpluses in countries such as Germany is partly responsible for the rise of protectionism elsewhere.

"The improvement of the trade balance is driven by imports and not by exports," Dekabank analyst Andreas Scheuerle said. "This means we don't have to put on the brakes on exports. This is a win-win-situation."

Merkel: Important issues still to be agreed upon

In 2017, Germany's trade surplus went down to 244.9 billion euros ($300.86 billion) from its record-high of 248.9 billion euros reached in the previous year, according to data from the Federal Statistics Office. It was the first decline since 2009.

The wider current account surplus, which measures the flow of goods, services and investments, edged down to 257.1 billion euros from 259.3 billion euros in the previous year.

"This will please U.S. President Donald Trump for whom the German export surplus has always been a thorn in his side," Christiane von Berg from BayernLB said.

In December alone, seasonally adjusted exports rose by 0.3 percent on the month while imports rose by 1.4 percent, the data from the statistics office showed.

The exports figure beat expectations for a 1.0 percent fall while imports also came in stronger than the forecast for a 0.5 percent decrease.

German leader Merkel says the current world order is under threat

The seasonally adjusted trade surplus in December narrowed to 21.4 billion euros. This was smaller than the Reuters consensus forecast for a surplus of 21.7 billion euros.

"The strong euro is hardly leaving a mark. Due to dynamic global trade, the euro appreciation is not posing an acute problem," Scheuerle said.

The German government expects the consumer-led upswing in Europe's largest economy to continue this year, forecasting 2.4 percent growth for 2018 after 2.2 percent in the previous year.

To secure a fourth term as chancellor, Merkel on Wednesday handed her Social Democrat coalition partners control of the finance ministry, giving them licence to spend a record budget surplus, and embracing their demands for European reform.

The agreed hike in additional state spending is likely to boost domestic demand even further and help to reduce the still large trade surplus also in the coming years.