Germany has first monthly trade deficit since 1991 on inflation

Germany reported its first monthly trade deficit in three decades, as companies faced surging costs for imports and softer demand for their products amid a darker economic outlook.  

The shortfall in May for Europe’s biggest economy was 1 billion euros ($1 billion), a gap not seen since 1991. Cross-border sales unexpectedly fell by 0.5%, while imports rose 2.7%, much more than economists anticipated. 

“It’s not that surprising that exports are declining in the current environment,” said Oliver Rakau, an economist at Oxford Economics in Frankfurt. “You have to focus on the imports, and there especially on price developments.” 

Russia’s invasion of Ukraine and China’s Covid-related lockdowns are wreaking havoc on international supply chains, with substantial fallout for Germany’s export-oriented economy. 

Prices for imports like energy, food and parts used by manufacturers rose by more than 30% in May compared to a year ago, while those charged for exports increased at only about half that rate.

Even if the data look less remarkable when adjusted for inflation, foreign trade will still have a negative contribution to German growth, which is also calculated in real terms, Rakau said. 

With rising living costs and high uncertainty, “the outlook for trade is rather bleak,” he said.