Germany’s huge trade surplus narrowed in May, but not by an amount likely to mollify critics in the US and elsewhere.
The balance of trade in goods showed a surplus of €19.7 billion, down from the €21.8 billion surplus seen in May 2017, according to the statistics office Destatis.
German exports declined by 1.3% compared with results seen in May 2017, while imports increased by 0.8%.
Deficits on services and investment income
The balance of trade Germany ran with other member-states of the European Union was still strongly in surplus, with exports of €65.7 billion and imports of $51.8 billion. Compared with May 2017, exports were 2.4% higher and imports were up 2.9%.
Within that figure, exports to other euro area countries were up 0.1% at €40.8 billion while imports were 0.6% higher at €32.9 billion. Exports to EU members not in the single currency zone rose by 6.5% to €24.9 billion while imports rose by 7% to €16.9 billion.
Within that figure, there was a deficit of €1.6 billion in services and of €7.4 billion in investment income, meaning Germany paid out more to foreign investors than it earned on its foreign investments.
There was a surplus of €0.1 billion on financial transfers, which includes payments to and from international organisations and remittances of expatriate workers to their families.
Germany has long been criticised for its current account surplus, which is the largest in the world when measured in dollar terms. Until 1999, when the euro was launched, Germany’s own currency, the mark, would respond to trade surpluses by rising, thus making imports cheaper in Germany and German goods more expensive in export markets.
In this way, the surplus would correct itself.
“Little to no progress” – US Treasury
But in the euro, this mechanism would work only if all the 19 economies in the bloc were like Germany’s, and this is far from the case.
In April, in its latest twice-yearly report to Congress on the economic and currency policy of major trading nations, the US Treasury noted: “There has been little to no progress in reducing this massive surplus the past three years, in part because domestic demand in Germany has not been sufficiently strong to facilitate external re-balancing and because Germany’s low inflation rate has contributed to a weak real effective exchange rate.”
It added: “Germany should take policy steps to unleash domestic investment and consumption – including meaningful fiscal reforms to minimise burdens from elevated labour and value-added taxes – which would narrow the gap between domestic income and spending and help reduce large external imbalances.”
Criticism of German surpluses is of long standing. Nearly five years ago, Germany’s Economics Ministry hit back at the critics, claiming the surpluses were "a sign of the competitiveness of the German economy and global demand for quality products from Germany”.