Germany records its first trade deficit since 1991

• Germany records its first monthly goods trade deficit in almost three decades.
•  Deficit caused by rise in value of imports to Europe’s largest economy and decline in exports.
• Russia’s invasion of Ukraine and sanctions put on the European Union have reduced demand for items from Germany’s export-oriented economy.

Due to inflation and trade disruptions, Germany registered its first monthly goods trade deficit in almost three decades.

In May, the deficit was caused by a rise in the value of imports to Europe’s largest economy and a decline in exports due to global trade disruption.

In May, German exports decreased 0.5% to €125.8bn from the previous month, while imports jumped 2.7% to €126.7bn. According to Bloomberg, this was the country’s first deficit of 1 billion euros since 1991.

Russia’s invasion of Ukraine and the ensuing sanctions put on the European Union

Along with China’s coronavirus lockdowns, economic sanctions imposed on Moscow by western nations have reduced demand for items from Germany’s export-oriented economy.

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Claus Vistesen, an economist at Pantheon Macroeconomics, stated that “Germany’s trade surplus has vanished due primarily to surging imports, countering otherwise reasonable growth in exports,” adding that he expected Germany to continue running a trade deficit throughout the summer.

The decline in overall German exports was attributable in part to a 2.8% monthly decline in shipments to other EU nations, while imports from those countries rose 2.5%.

Exports to the United States grew 5.7% and exports to China increased 0.5%, but exports to the United Kingdom decreased 2.5%.

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