The mighty are falling.
Major exporters Japan and Germany both booked a slip in exports for June, largely attributable to weak economic growth around the world resulting in waning demand.
Germany, a leading exporter of vehicles, machinery, and chemicals, reported a 1.5-per cent drop in exports in June from May, according to the country’s Federal Statistical Office, Destatis. This despite the fact the euro weakened steadily over the second quarter, standing at €1.25 compared with the U.S. dollar in June, which ought to have bolstered German trade and stimulated exports, Scotiabank economists Derek Holt and Dov Zigler said in a note on Wednesday.
Year-over-year, German exports are up 7.4 per cent, “a surprisingly big figure,” said Carl Weinberg, chief economist at High Frequency Economics. But the trend in overseas sales is for a slow decline, he said. Germany shipped 4.5 per cent more exports overseas in March 2012 compared with a year earlier, and recorded a smaller 4.1 per cent annual increase in June.
Within the common-currency euro area, exports are showing a steeper drop. They were down 3 per cent in June compared with a year earlier, amounting to €35.5-billion.
Germany’s trade balance still showed a surplus of €17.9-billion in June, as imports also fell 3 per cent over the month.
The disappointing results are just the latest indication of slowing global trade amid deteriorating growth in major economies around the world. German industrial production also declined 0.9 per cent from May, and the most recent purchasing managers index showed the sharpest contraction to the manufacturing sector in more than nine years.
In Japan, where the yen has been trading at ¥80 or lower compared with the U.S. dollar since May, at least part of the drop-off in exports can be blamed on the strength of the Japanese currency. The yen has also been hitting highs against the euro recently, which is putting pressure on the Japanese central bank and Ministry of Finance to do something to weaken the currency.
It’s not clear how much of Japan’s 0.6-per-cent drop in exports is due to the strong yen, and how much is due to a general deterioration in global demand for Japanese cars, electronics, and other major exports. As Japanese imports also fell 5.5 per cent in June, the country’s trade deficit actually improved to ¥166.6-billion, compared with a deficit of ¥449.8-billion in May.