Germany records first monthly trade deficit since 1991 as inflation soars

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

Figures from the country’s statistics agency showed a surge in the value of imports and modest decline in exports had pushed Europe’s largest economy into a trade deficit of €1bn (£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% on the previous month to €125.8bn, while imports increased 2.7% to €126.7bn, more than anticipated by City economists. Compared with the same month a year earlier, exports were up by almost 12%, while the value of imports surged by almost 30%.

German’s dominant manufacturing base has faced disruption from global supply chain problems caused by the pandemic and lockdowns in China. Soaring energy prices and weaker demand for goods is also hitting demand.

Figures published on Friday showed manufacturing output across the eurozone fell in June for the first time since the depths of the initial lockdowns in 2020, in a sign of worsening economic conditions across the the single currency bloc.

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

The figures come as Russia’s war in Ukraine pushes up energy prices across Europe, driving up inflation and affecting the trade balance of countries dependent on oil and gas imports for much of their energy needs.

The UK’s current account deficit, which measures cross-border trade and financial flows, surged in the first quarter of this year to the highest level since records began in the 1950s. Although largely due to the soaring cost of fuel imports, it also comes as many British exporters grapple with Brexit disruption from border problems and reams of red tape.

In contrast, Russia’s current account surplus more than tripled in the first four months of the year, hitting the highest level since at least 1994. The increase was driven by soaring gas prices lifting the value of exports and western sanctions leading to a fall in imports.

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

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

“Germany’s trade surplus has now evaporated, thanks mainly to soaring imports, offsetting otherwise decent momentum in exports,” he said. “Looking ahead, we suspect the external balance will remain in deficit over the summer.”


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