July was a very good month for German exporters as sales overseas climbed 2.5 percent from June to reach a new record high. With imports up 2.3 percent, the seasonally adjusted trade balance widened out from a minimally larger revised E22.1 billion at the end of the second quarter to E22.8 billion, also a new peak. The unadjusted data painted a similar picture with the black ink climbing from E24.1 billion in June to E25.0 billion.
Compared with July 2014 exports were 6.2 percent stronger with sales to the other EMU countries up 5.5 percent and to non-EU nations 6.4 percent better off. Total imports were 6.1 percent higher on the year.
The July black ink was 3.3 percent above its average reading in the second quarter which bodes well for another positive contribution from net exports to real GDP growth this quarter. The German economy is clearly benefitting significantly from euro weakness which, notwithstanding the currency's partial recovery during the summer, remains at very competitive levels for German industry.
Merchandise trade balance measures the difference between imports and exports of both tangible goods and services. In Germany the goods balance is the main focus as this dominates developments in the overall current account balance. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.
Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.
Imports indicate demand for foreign goods and services in Germany. Exports show the demand for German goods in countries overseas. Given the size of the German economy, the euro can be sensitive to changes in the trade balance. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.