Something doesn’t add up.
Germany’s export-focused economy has been showing some signs of weakness, but no signs of an outright Financial-Crisis type collapse. So this data set released today by the German Statistical Agency doesn’t match those trends, and it doesn’t fit into the scenery. It could be an outlier, a statistical quirk, something that will be adjusted out of the way later. Or it could be a very unpleasant warning sign.
The German Statistical Agency today reported that, based on preliminary data, exports in July plunged 10% compared to July last year (not seasonally adjusted), to €96.4 billion.
And imports dropped 6.5% (not seasonally adjusted) year over year, to €76.9 billion. This slashed Germany’s trade surplus for July by 21% to €19.5 billion.
Exports to the 28-member European Union plunged 7.0% to €56.3 billion, while imports from EU countries dropped 4.5% to €51.3 billion.
And now it gets interesting, in the worst possible way…. Year-over-year Exports to “third countries” – countries outside the EU, particularly the US, which has become Germany’s largest trading partner in 2015, replacing France in that position – plummeted 13.8% to €40.1 billion.
Imports from those “third countries” plummeted 10.1%.
Statistical data has a way of driving rational people nuts, and I’m not entirely sure what to make of it. A massive drop in exports like this has not occurred in this year or last year. But double-digit year-over-year increases have occurred when very large orders came together in one month. In 2015, every month booked year-over-year export increases. So far in 2016, there were three months out of seven when exports dropped on a year-over-year basis: January (-1.5%), March (-0.6%), and now July (-10.0%).
This leaves exports for the first seven months of the year down 0.4%, compared to the same period a year ago.
The last time annual exports edged down was in 2013 (-0.4%), due to the lingering effects of the euro debt crisis. Before then, the last downturn was the infamous year 2009, when Germany’s exports plunged 18.4% as global supply chains were freezing up. And those were the only two years when exports declined since 1993!
So annual export declines are rare in this export-focused economy where every time a Chancellor goes overseas, planeloads of German business tycoons accompany him or her to make and sign mega-export deals, such as selling high-speed trains to Russia or military helicopters to Saudi Arabia. Which often leaves folks scratching their heads.
Why, for example, would Indonesia, an island nation, need 104 Leopard battle tanks, 50 Marder infantry fighting vehicles, and 10 other military vehicles? To fight off a land invasion from where exactly? Or to fight off its own people? But no matter, exports are exports, and they’re sacred, and this was 2013 when export growth was shaky, and Chancellor Merkel went to Indonesia on a state visit and the deal got done.
So July’s plunge in exports is rattling some nerves. Explanations are being put together a mile a minute. The big one is this: In July 2015, exports were strong, at €107.1 billion, up 7.1% from the prior year. And so the theory goes that today’s report was so bad because a year ago, it was so good. It’s the “base effect.” That makes some sense. But wait…
July 2015 exports were not as strong as March 2015 exports, and exports in March 2016 had the same base effect or bigger to deal with as those in July, but they edged down year-over-year only 0.6%, rather than plunging 10%.
And besides, exports this July, at €96.4 billion were 3.6% lower than exports in July 2014! So something doesn’t quite add up.
The fact the exports for the year so far are also declining doesn’t improve the rosy scenario. Nevertheless, we will need a few more months of data to determine if this export plunge is real, and scary, and speaks of a sudden collapse in global demand for German goods, or any goods, or if it’s just a statistical outlier within a run-of-the-mill, if rare, German export downturn.
There might already have been some red flags. Read… World Trade Falls for Second Quarter in a Row
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Exporting nations are as strong as the nations they export to.
Start to see the problem.
A series of rate increases beginning about now ought to jerk a knot in global trade. That said, the Fed has NEVER hiked rates without the probability being at 100% beforehand, which it currently isn’t.
Two observations:
(1) Statistics are only as good as the data used to compile them. IMNSHO the data and statistics of the major economies has been “pencil whipped” and “massaged” to produce ideologically acceptable results for at least the last generation. This can be a deadly danger when the “leadership” starts to believe the “rosy” data, i. e. the USSR.
(2) An exporting country can run a trade surplus only as long as their customers have money to spend. Once all the money is “sucked” out of the importing economies – GAME OVER. The PRC seems to understand this, and is making large investments in Africa and Latin America to make sure their customers always have money [or money equivalents] to exchange for PRC manufactured goods and services.
If by PRC you mean CCP, their investments are political not economic.
They gave 500 tractors to Zimbabwe- each worth a fortune in local terms- they were parked in the driveways of government ministers. Their loan to Maduro in Venezuela- bad investment.
Africa is a small customer for anyone including China.
China never did achieve the Japanese breakthrough- it never offered quality, just price. Its exports are Walmart stuff- cheap apparel and consumer electronics, toys, etc.
They are now coming under pressure from economies that emerged from communism even later than themselves- Vietnam and Cambodia.
There is ALWAYS a bunch of low hanging fruit in a newly reformed Marxist economy.
Eighty percent of China’s health care budget is consumed by 8.5 million CCP members and their families- this close to being literally 1 % of 1%.
The big question for China is what to do with the CCP- a giant tape worm living within the economy. There are two routes: the USSR route and the
Romania route.
For a broader view – watch REAL China expert Ann Stevenson-Yang’s Feb 2015 presentation on Youtube.
The question that should be asked is “is a red 1% tape worm worse than a blue 1% tapeworm?”
What moronic “comment”.
The US exports dollars and their customers have alwaysbeen willing to send them goods in return….the US makes dollars the old fashioned way…they print them….
In today’s Fiat currencies it is not about having nominal money but REAL money or one that has lost confidence and is still accepted on faith…
We send them paper they send us stuff…..what a great deal for the Americans!
Dow needs to shed 8000 points to be realistic. Interest rate on ten year bond needs to be 3.5% to make money have a real value. Reality sucks but so does the FED’s goldie locks approach to fixing the economy. Shed the FED! Lets get back to reality.
WE THE PEOPLE.
Johnny: What is “money”
When you clearly understand that, then everything makes perfect sense.
Anything that can easily be exchanged for anything offered in a market.
RE: …What is “money …
—–
First, money is an entirely human construct, which is increasingly “virtual” rather than physical, as represented by a pile of gold coins. As a human construct, it can disappear as quickly as it was created. Many of the more successful civilizations in the past did not use money, for example the Mayas, the Aztecs, and most of the older civilizations which relied on barter.
“Money” is defined in the orthodox economics texts as (1) a medium of exchange, and (2) A MEASURE AND STORE OF VALUE.
In Marxist economics “money is the means by which material use-values are “transubstantiated,” as Marx sometimes put it, into exchange-value, thus alienating all commodities from the labour that really gives value to commodities.
The key here is what is “value.” As our society becomes increasingly automated/robotized/computerized, the value of labor represented by a good or service continually falls, impacting the historical value of money, rendering it increasingly useless as a “measure and store of value.”
Indeed, it may well be that we have reached a point in the evolution of human social organization where “money” in the traditional sense is increasingly obsolescent. It is not at all clear what might replace “money,” but it is well to remember that humanity prospered for far longer without money than we have with “money.” FWIW – although it was never made clear exactly how it worked, the human society shown in Star Trek existed/functioned without “money.”
Debt money is a trap, and a way for central banksters to suck up all the wealth. This has a simple mathematical proof, it’s not a theory.
It’s banned by Islam, rather contrary to Christianity (Jesus vs teh Money Changers) and as a weapon in private hands – is also against the US constitution.
It’s the most dangerous thing we know.
The unconstitutional 1913 Federal Reserve act has blighted life on earth for some time.
Credit money is a means of trade and – managed carefully – a store of wealth. Look at inflation pre 1913 – it was effectively zero for long periods.
Pres. Andrew Jackson, Abraham Lincoln and JFK all worked to free people with credit money. JFK never got to issue his treasury notes, although he had them printed and ready to roll.
While we have debt money we’ll have debt slavery and a ever widening wealth gap.
Month after month, you see data on ‘exports’ by country after country and the import numbers do NOT jive when compared to the export numbers as a whole or even country to country month to month.
No body seem to have questioned any of those ‘imaginary’ data points, massaged, seasonally adjusted or whatever. But, unless this humble world is exporting goods to some other planet, the total numbers have made no ‘accounting’ sense for a long time. Was Germany a part of this stage show, I can remember, but that may answer the question of this sudden drop….the stage show is no longer selling tickets to the bean-counters audience and it can’t be hidden any longer.
Germany. VW. Export USA. Diesel cars. No connection surely?
Either that or my ceasing the need to stock up on Bosch products really has made a difference!
Most if not all the VAG diesel engines sold in North America are manufactured in Mexico, as are the Bosch components used on them.
But you bring up a valid point: if car sales are so good, why the need for the large cash rebates everybody, even BMW, is offering right now?
Every commercial break on my TV has at least two auto commercials offering 60-72 months 0% financing. Must mean something. Question is, and maybe for Wolf, are most people qualifying for the 0%, or is it a bait and switch?
Most ultra-low EAPR car loans (generally speaking under 4%) are promotional campaigns, meaning they are only valid on certain models in a certain time frame.
As for those who qualify… generally speaking if credit rating isn’t catastrophically bad everybody qualifies.
Credit quality on ordinary car loans is degrading badly, and EAPR is reflecting this. I’ve just bought a Toyota and I have a perfect credit score, meaning I have no ongoing mortgages nor other car loans, I have never missed a payment in the past, I have good collaterals etc.
EAPR on the smallest and cheapest models started at a pretty steep 7.25% but got progressively better as we climbed up the model list. And Toyota is still reasonably cheap as far as interests go: on models in the same bracket, Ford has 8% EAPR and PSA (Peugeot and Citroen) a massive 8.75%.
Intriguingly enough SUV’s invariably carry lower or even far lower EAPR’s than ordinary cars using the same platform/engine: I think this reflects the fact SUV’s are very high margin models. In common language, you pay more for an inferior product but you do so in style(?).
“Why, for example, would Indonesia, an island nation, need 104 Leopard battle tanks, 50 Marder infantry fighting vehicles, and 10 other military vehicles?”
Well let’s see: West Timor, Bali, maybe another go at East Timor, Aceh……………
Or maybe down the road they would like to keep their military in good shape. Big boys need their big toys. Or maybe a try at Australia down the road……….
Here in Oz we really get upset about boats of people coming over from Indonesia. You know those people that somehow make their way from the Middle East and try to get into Oz.
We’ve spent billions on patrol, admin, offshore processing and the like and the flow of people has only been a trickle.
IF Indonesia ever wanted to take down Australia one way would be to unleash a flow of refugees similar to that going on in Europe. We’d be bankrupt and overrun in no time.
Neighbour, big trading partner, and holiday destination for many Australians, but IMO one of the biggest threats to Australia.
Have no fear. Our high tech subs will take that problem down. LOL
The tank is obsolete, as is the surface warship. Aircraft kill either like fish in a barrel.
Tanks are great for crowd control.
But you’ve got to admit, monopolizing a whole continent to yourself, a 30 million (or less) country, in this age of global warming, connected world, human rights, and social justice, is a very selfish thing to do, right?
Especially if you happen to have neighbor who have 280 million poor people in low, smallish islands, and who themselves invaded by refugee from middle east.
When we asked them why they came, they said they have no hope to live in peace in their own country, due to interference from western countries in local power struggle, so to speak. And they migrate to find peace in other place. When we asked them, ”why australia ?” They tartly replied, ‘Why not? Those people down under have their own responsibility in making our country the way they presently are, in a very sorry state. So, a payback is in order, and fair too.’ That is what they said.
So, who are us, indonesians, to hinder them to get their justice and find themselves peace and happiness? Dutifully, we let them go with good wishes and sincere godspeed, as a good human being should.
I am pretty sure the Aussies would love to invade Indonesia. Bali is like their second home. I’ve heard there are a bunch of really exclusive and beautiful eco islands in Indonesia as well. Plus it has a ton of natural resources. What’s not to like?
And speaking of tanks. Perhaps the Indonesians would use it to take back the areas now “occupied” by Freeport Mcmoran.
Despite one month statistical data, Germany will register a record trade surplus of over 300B $US/y. This is not only an increase from last year, but Germany will also surpass China, whose exports have significantly fallen.
That said, all data seems to point to a slowdown.
I am not sure what the picture would look like if we took out arms production and exports which usually goes on the credit card.
That monster surplus literally doesn’t add up: if German firms are having it so good, why are they all offering major cash rebates?
I remember back in the 80’s when you ordered tooling in Western Germany you had to pay what they wanted and wait as much as they wanted for delivery.
Right now you are offered at least a 10% rebate without even haggling and, if you go for off the shelf products, you can have your new tooling delivered in a month. Back in the 80’s we would have killed for it, literally.
Chemicals are even worse: unless you ask for a custom blend, delivery is under a week and rebates start at 10-15%. I remember the days when asking a German firm for a rebate was a sure way to end a conversation…
I strongly suspect Germany’s export miracle is not very different from China’s: they have built massive overcapacity in all sectors (except refined oil products), only they were better at hiding it. Now Berlin, very much like Beijing, has become careless with data and the numbers have taken a life of their own.
Exporting countries are only as strong as the countries they export to.
The Western consumer suddenly reduced consumption in 2008 and China suffered.
Germany used to export a lot Greece, it doesn’t now.
When demand drops you have excess capacity.
Greece is to Germany what your average wage slave is now to the economy.
When you’ve drained all the wealth out and got them tucked up with huge debts (ironically debts of imaginary, funny money) surprise surprise they stop buying all of your stuff.
The lunatics who invented the Euro to hoover up the wealth of Europe really didn’t think it through. They knew that wanted wealth, they knew how to build the weapon (The world’s largest financial weapon- the FED – gave them a good idea of its power) but they didn’t think how the post apocalyptic landscape would look like.
Like all greedy people, their greed is essentially stupid, as therefore, are they. What have they achieved? Essentially they have run a con and wrecked a continent. How proud they must be.
And all based on the simple equation of renting a currency, Central_banks_wealth = Other_peoples_wealth * ((1 + interest_fraction)) ^ years_of_operation.
This is why I laugh at people who blame Greece for their debt – seriously the maths says they never had a chance. It will eat Germany too one day too, just give is enough ‘years_of_operation’.
A quick look at any government, industrial or private debt will reveal the exponential debt curve of that equation. It’s not chance, bad management or bad luck – it’s engineered right into the currency. Simple, clever, deadly. The moment of doom for the US was in 1913, since then it’s just been a matter of the years rolling by…
The problem with excess capacity in exporting countries (China, Germany, Japan, ROK, Taiwan etc) is not so much due to dropping demand: demand is not falling off a cliff due to a depression but stagnating and contracting slowly at the edges.
The big problem is capacity has been built up to feed a demand which was predicted to be skyrocketing at least into the 2020’s.
Problem is that growth never came and 2013 was as good as it was ever going to get.
That’s how we got to have excess capacity in all sectors, from furniture to automated lathes, and the problem has been made (much) worse by the ongoing financial repression which has made servicing the debt incurred to build up that excess capacity unnaturally cheap.
In a normal rate environment (which most people now don’t even remember anymore), the first thing you do when demand has plateau’d for good is adjusting your productive capacity so that supply and demand will reach some sort of balance.
But today… you tend to avoid cutting productive capacity because shareholders and investors are still afraid to miss the train called “escape velocity”, a train which left years ago with nobody on board. The possibility of issuing bonds and piling up debt at unnaturally low rates make this an attractive proposition and, let’s be honest, if shareholders and investors demand cuts somewhere, they’d much rather people be fired or employees be rehired as “independent contractors”.
Nobody likes to think we stepped into the unknown in 2009 with the decision to prevent malinvestment (of which overcapacity is part) being purged from the system. For a few years it seemed to work even too well but now it’s apparent those few years have added to the bill.
Those old fashioned recessions did serve a useful purpose in so many ways.
Avoiding a recession since 1999 means the one that is necessary now could destroy the whole thing.
Agree that the picture is not as rosy as forecast. There is more rot down under than what’s visible on the surface, and many chicken will come home to roost. Just to mention a few examples.
On the political side, the decision to shut down nuclear and go renewable results in the most expensive electricity in the region. And why, I pray, to plaster the country with solar cells when it is the darkest, murkiest place in winter.
On the business side, VW stupid decision to become the biggest auto maker in the world which resulted in the push to the US market which is the sole reason for it’s current troubles. Trouble is, the big honchos at VW have zero knowledge of the US market which is a mine field to avoid.
We could be getting to the point where the military customers that Germany sells to are all stocked up and ready, not much left to buy. Or maybe Germany resorted to creative accounting and delayed reporting of monthly decreases in exports this year, not wanting to admit to the world how bad things are getting. I have wondered this year how Germany is managing to keep up the exports when their trading partners are clearly in trouble and with declining global trade overall. And finally, there seems to be a very good chance that they’re giving us the brutal truth now because they know it’s all going to hell in a handbasket right soon anyway, so why not come clean, what the heck?
Another NWester here: If they gave us the truth I’m afraid it’s much worse than what’s being reported.. 6 quarters in a row of falling corporate profits and record or near record corporate debt that’s starting to unwind. The 7th largest shipper is sea-bound because they are too broke to land because of falling demand and falling shipping rates. The list goes on and on and still the market chugged higher.. Until today..
Haha. Feet of clay?
This will no doubt dent the “why can’t WE all be successful and wealthy like Germany, Sweden, Norway…” statist argument…
Always remember taxes in Germany are actually pretty low by European standards, as are utilities, junk fees etc. In a way it’s a variation of the Bismarckian model: the Iron Chancellor’s stroke of genius was understanding Prussia could have a powerful, well equipped army only if she had a private economy strong enough to pay for that army.
France and Italy pretty much put their heads on the chopping block by supporting a common market AND a common currency with Germany: lacking radical reforms, neither country could compete with Germany on anything remotely resembling an equal footing.
This is not to say French and Italians are lazy, but their tax codes, legal systems, labor markets etc are nowhere near as conductive to private enterprise as Germany’s.
A typical example is the cost of labor: while an Italian worker is paid nowhere near as well as a German colleague, he is actually a worse deal for his employer. Not only taxes on labor are very high, but stamp duties, fees etc are insane. To this it must be added the Italian tax code stiffles productivity by effectively punishing investments.
All in all I’d say Italy is much farther down the road to Statism than Germany is.
Personally I pay much less in taxes in the US than in Germany
These tax rates apply to single people with no children, on an average salary for their country.
Belgium- 42.80%
Germany – 39.90%
Denmark – 38.90%
Hungary- 35%
Austria -34%
Greece – 25.4%
OECD Average – 25.10%
UK – 24.90%
USA – 22.70%
New Zealand – 16.40%
Israel – 15.50%
Korea – 13%
Mexico -9.50%
Chile – 7%
The following tax rates apply to married couples with two children.
Denmark – 34.8%
Austria – 31.9%
Belgium- 31.8%
Finland -29.4%
Netherlands – 28.7%
Greece 26.7%
UK – 24.9%
Germany – 21.3%
OECD average – 19.6%
USA – 10.4%
Korea – 10.2%
Slovak Republic – 10%
Mexico – 9.5%
Chile – 7%
Czech Republic – 5.6%
Value added tax in Germany is 19%
There are two major problems in trying to compare taxes between countries:
(1) There are the nominal tax rates, and then there are the actual tax rates; and
(2) Tax rates only tell half the story, in that much depends on what services you get for the taxes. In many cases the individual in low tax countries must either do without a service, or pay for it out of their own pocket, which is provided in a high[er] tax rate country. A few examples are medical care, adequate retirement, child care, university/post-secondary education, public health (e. g. food/water safety, containment of contagious diseases/prevention of epidemics) and “quality of life” items such as public transportation,public/subsidized housing, and government (tax) supported “culture.”
While it is a bit of bother, it is informative to add the individual “out-of-pocket” costs to the “low” taxes, to determine in which countries are the median or average citizens better off.
It does add up with their decline in industrial output, reported recently, and general complaint of rising costs and price cutting to remain competitive. It is all over the surveys and German press in the last few weeks. They are not at all happy.
Why, for example, would Indonesia, an island nation, need 104 Leopard battle tanks, 50 Marder infantry fighting vehicles, and 10 other military vehicles?
I lived in Indonesia for 7 years — based on my understanding of how things work there — I would guess that the Minister of Defense and other senior officials were paid multi-million dollar kick-backs for signing off on these purchases.
Additionally — there is an element of national pride in having a well-equipped military.
Lol, as if there is sanity to be found in a country where their minister was lamenting in public how their past mini-Holocaust of their Chinese minority wasn’t quite enough.
German exports is an interesting topic. Note that German exports to the EU countries and German imports from the EU countries are pretty close. So it is mostly double counting. Germans exporting parts to Hungary only to import a complete product like a car or a washing machine. So what really matters is how much or German exports go to third countries either directly from Germany or reexported from other EU countries (or rather EEA countries). German exports to Russia and other CIS plunged dramatically and keep falling, this was followed by a very sizable contraction in German exports to China and some other Asian countries and also oil exporting countries, which lost most of their export revenue. Some of this was political (Germany, willing to follow suit on sanctions, is no longer seen as a reliable partner), some purely economic (less revenue to buy relatively German-made products). But for a while this was offset by exports within the EEA (which again need to be adjusted for double counting – if Germany consumes less, it exports less to the EEA and imports less ffrom there, as is the case with the current statistics) and growing exports (cars and equipment mostly) to the US. But the tide is turning back on the US car boom and most projects in the petrochemical industry supplied by Germans are complete). Hence the exports to the US seem to be falling off the cliff. So it does not look like a blip! More like an exporting nation experiencing the consequences of playing political games.