German Trade Surplus Widens to €16.6 billion but Exports Slide by 1.2% in August

Highlights

• German trade surplus widened from €15.9 billion to €16.6 billion in August.
• Exports fell by 1.2%, while imports declined by 0.4% compared with July 2023.
• Later today, ECB Chief Economist Philip Lane will speak on inflation before the focus shifts to US jobless claims and Fed speeches.

German Trade Surplus

The German trade surplus unexpectedly widened from €15.9 billion to €16.6 billion in August. Economists forecast the trade surplus to narrow from €15.9 billion to €15.0 billion.

However, exports declined by 1.2% compared with July. Economists forecast a more modest 0.4% decline.

According to Destatis,

• Exports were down 5.8% compared with August 2022.
• Imports fell by 0.4% in August while rising 16.8% compared with August 2022.

Trade with EU Countries

• German exports to EU member states declined by 1.5%, while imports rose by 1.9%
• Exports to euro area countries fell by 2.6% vs. a 3.2% jump in imports.

Trade with Non-EU Countries

• German exports to non-EU countries were down 0.9% compared with July 2023, while imports slid by 3.0%.
• Exports to the US declined by 1.3%, while exports to China increased by 1.2%.
• Imports from China and the US fell by 2.0% and 3.1%, respectively.

The larger-than-expected slide in exports and fall in imports aligned with expectations of a German recession. Germany’s trade-to-GDP ratio exceeded 90% in June 2023.

EUR/USD Reaction to German Trade Data

Ahead of the German Trade Report, the EUR/USD fell to a low of $1.05009 before rising to a pre-stat high of $1.05288.

However, in response to the German trade figures, the EUR/USD rose to a post-stat high of $1.05210 before falling to a low of $1.05125.

This morning, the EUR/USD was up 0.10% to $1.05139.

Next Up

ECB Chief Economist Philip Lane will participate in a policy panel at the ECB Conference on Monetary Policy: Bridging Science and Practice. Further comments on tackling inflation and the outlook for interest rates will draw interest.

Following the ADP Nonfarm Report, US initial jobless claims will be in focus later today. Economists forecast initial jobless claims to increase from 204k to 210k. An unexpected spike in jobless claims may fuel bets on a deterioration in US labor market conditions.

Weaker labor market conditions would likely ease pressure on the Fed to pursue a hawkish interest rate path.

However, investors must monitor FOMC member commentary throughout the day. FOMC members Loretta Mester, Mary Daly, Michael Barr, and Thomas Barkin are on the calendar to speak today. FOMC voting member Michael Barr may impact Fed rate hike expectations more.