BERLIN (Reuters) - German imports soared more than expected in January, outperforming a surprisingly strong rise in exports in a further sign that Europe’s biggest economy fired on all cylinders at the start of 2017.
Data released by the Federal Statistics Office on Friday, also showed the current account surplus fell sharply on the month suggesting vibrant domestic demand is helping to slowly re-balance Germany’s traditionally export-driven economy.
“Germany’s domestic demand will remain strong this year and we expect imports to rise faster than exports in 2017,” said Sal. Oppenheim economist Ulrike Kastens.
“This should help to contain the trade surplus, although it is likely to remain high,” Kastens said, adding that German companies would have to invest more to further fuel imports and significantly reduce the trade surplus.
“But many firms are still holding off investments due to a series of political risks and uncertainties,” she added, pointing to the threat of a protectionist U.S. trade policy and the unclear outcome of several major elections in Europe.
Seasonally adjusted imports rose by 3.0 percent on the month, while exports increased by 2.7 percent, the data showed. Both figures came in much stronger than expected.
A breakdown of unadjusted trade figures showed that exports to countries outside the European Union rose the sharpest while imports were particularly strong from EU countries outside the euro zone.
“After their lacklustre performance in the past year, exports are rebounding in 2017,” DIHK economist Volker Treier said, adding demand from emerging markets such as China, Brazil, Russia and India was rising.
Despite the jump in imports, the seasonally adjusted trade surplus stood at 18.5 billion euros ($19.6 billion), up slightly from 18.3 billion euros in December. Analysts put the discrepancy mainly down to one-off factors at the turn of the year
The wider current account surplus nearly halved, however, to 12.8 billion euros after a revised 24.8 billion euros in December, the data showed. On the year, it shrank by 1.8 billion euros.
In 2016, German exports rose 1.2 percent on the year to hit a record 1.2 trillion euros while imports edged up 0.6 percent to reach an all-time high at 955 billion euros. This propelled the trade surplus to 252.9 billion euros, also a record high.
The European Commission and the International Monetary Fund (IMF) have repeatedly urged Germany to take advantage of record-low borrowing costs and increase investment as a measure to reduce the country’s large trade and current account surpluses.
U.S. President Donald Trump’s trade adviser on Monday described the U.S. trade deficit with Germany as “one of the most difficult” issues, calling for bilateral discussions to reduce it outside of European Union restrictions. Peter Navarro’s comments followed his complaints that Germany was exploiting a weak euro to gain a trade advantage.
The criticism was firmly rejected by Finance Minister Wolfgang Schaeuble on Tuesday who said Germany’s trade surplus was the result of high demand for its products and this had nothing to do with any form of currency manipulation.
The war of words has set the stage for a heated debate on trade and tax policies when G20 decision-makers meet in the German town of Baden-Baden next week.
Reporting by Michael Nienaber; Editing by Dominic Evans