Eurozone: record German trade surplus, huge French deficit

7th February 2014, Comments 0 comments

Germany's trade surplus surged to a record high in 2013 despite flagging in the last few months, but France still showed a huge deficit despite progress, data showed on Friday.

Germany, Europe's biggest economy, notched up a trade surplus of 198.9 billion euros ($270 billion) in 2013, the highest since foreign trade data have been compiled.

At the same time, France, the eurozone's second-biggest economy, pared back its deficit by 6.0 billion euros.

That that still left France with a deficit of 61.2 billion euros, according to French Trade Minister Nicole Bricq.

In Germany, however, analysts took a mixed view of the latest German figures, saying that in some ways they were disappointing.

A trade surplus is a vital factor of growth in an economy. The German surplus, built in large part on medium-sized niche companies, goes a long way to explaining the wealth and power of the German economy.

But France has developed a chronic structural deficit over many years and this is a severe drag on the economy. Analysts say it reflects falling competitiveness, and a relative shortage of powerful small companies and undue reliance on mid-range products.

Correcting this is a top priority for the Socialist-Green French government, which is moving towards reducing charges on companies, somewhat along the lines of reforms in Germany 10 years ago, and cutting deeply into public spending.

French Trade minister Bricq said 2014 would mark a year of "recovery and rebound".

"After a difficult year in 2013, the economic lights are turning to green, particularly in the eurozone where we do 47 percent of our trade," she said.

Germany has come under fire for its booming trade surplus, with critics arguing that its economic prowess comes at the expense of the eurozone's weaker members.

The critics argue that Germany needs to boost domestic demand and so help its EU partners by spurring export-driven growth in their economies rather than continue to rely mostly on its own exports for growth.

But Berlin has persistently dismissed the criticism, arguing that the high surplus reflects the competitiveness of German firms.

The 2013 trade data appeared to support this.

Total exports slipped by 0.2 percent over the year as a whole and exports to the euro area fell by as much as 1.2 percent, while imports from the eurozone were only fractionally lower, Destatis calculated.

Exports to the wider EU edged up by 0.1 percent while imports from the EU grew by 0.8 percent.

A closer look at the monthly data showed that export momentum -- traditionally the main driver of German growth -- has also been tailing off at the end of the year,

In raw or unadjusted terms, the trade surplus narrowed to 14.2 billion euros in December from 19.1 billion euros in November.

And in seasonally adjusted terms it decreased to 18.5 billion euros in December from 18.9 billion euros in November, with exports falling faster than imports.

Combined with falling industrial output and factory orders data for December, the trade numbers were "disappointing," said Natixis economist Johannes Gareis.

The 0.2-percent drop in exports over the whole year "reflects the weak global economy in the last year," he said.

Newedge Strategy analyst Annalisa Piazza agreed.

"In a nutshell, trade activity was not exceptionally strong for Germany at the end of the year," she said.

Berenberg Bank economist Christian Schulz similarly believed that the outlook for German trade this year was "mixed."

He said: "Strengthening export markets in the developed world could be offset by weaker demand in those emerging markets currently in turbulence. But as long as China stays apart, the impact might be limited."

Nevertheless, "the trade surplus looks set to stabilise or even shrink as stronger domestic demand should boost imports more than strengthening global demand will increase exports," he said.

Gareis at Natixis also believed the situation could improve.

"For this year, we are expecting an increase in German exports due to improving external demand conditions, which is in line with December's steep gain in factory orders from euro area countries," he said.

"Still, external trade is not likely to be a key driver of Germany's economic growth in 2014," Gareis concluded.


© 2014 AFP

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