Germany posts first monthly trade deficit since 1991 as inflation soars

Germany recorded its first monthly trade deficit since 1991 amid high inflation and supply chain disruption weighing on the country's industrial base.

< p class="dcr-xry7m2">Figures from the country's statistics agency showed that a rise in the value of imports and a slight drop in exports had pushed Europe's biggest economy into a trade deficit of 1 billion euros (£860m) in May.

The monthly deficit was the country's first since the year after German reunification, according to Bloomberg.

Exports fell in May by 0.5% from the previous month to 125.8 billion euros, while imports increased by 2.7% to 126, 7 billion euros, more than expected by the city's economists. Compared to the same month a year earlier, exports increased by almost 12%, while the value of imports jumped by almost 30%.

Base Germany's dominant manufacturing has been disrupted by global supply chain issues caused by the pandemic and lockdowns in China. Soaring energy prices and falling demand for goods are also hitting demand.

Figures released on Friday show manufacturing output in the euro zone fell in June for the first time since the depths of the first shutdowns in 2020, a sign of deteriorating economic conditions in the single currency bloc.

According to the latest figures from the trade, the prices of imports such as energy, food and industrial components rose by more than 30% in May compared to a year ago, while export prices increased by around half the rate.

The figures come as Russia's war in Ukraine drives up energy prices across Europe, pushing up inflation and affecting the trade balance of countries dependent on oil and gas imports for a large part of their needs. energy ins.

The UK's current account deficit, which measures cross-border trade and financial flows, jumped in the first quarter of this year to the highest level since re the ropes began in the 1950s. Although largely due to soaring fuel import costs, it also comes as many UK exporters grapple with Brexit disruption due to border issues and tons of red tape.

By contrast, Russia's account surplus more than tripled in the first four months of the year, reaching the lowest level highest since at least 1994. The increase was driven by soaring gas prices increasing the value of exports and Western sanctions driving down imports.

The German exports to Russia fell by e almost 60% in March after the invasion of Ukraine, and fell again by almost 10% in April. Exports rebounded on a monthly basis for the first time in May, rising almost 30% to €1 billion. German imports from Russia fell 9.8% to 3.3 billion euros.

Claus Vistesen, chief eurozone economist at the consultancy Pantheon Macroeconomics, said a sharp slowdown in Russian gas supplies to Germany would drive the volume of imports, but the value would increase as the overall cost of energy rises.

< p class="dcr-xry7m2">"Germany's trade surplus has now evaporated, mainly thanks to soaring imports, otherwise offsetting decent momentum in exports," he said. "Looking ahead, we expect the external balance to remain in deficit over the summer."