German trade data, already out, showed both exports and imports rose more than expected in April – up a sharp 2.3 and 1.9 percent respectively. That suggests that its fabled industrial base is in reasonable shape but also that domestic demand is holding up, possibly helped by some above-inflation pay deals. The figures represent a significant bounce from the first quarter when Europe’s largest economy just managed to eke out some growth.
Let’s not get carried away, though. Germany’s PMI survey earlier this week showed a slight decline in export orders in May and the Bundesbank has just released its latest set of economic forecasts, cutting its 2013 growth forecast to 0.3 percent, adding that risks are largely skewed to the downside. It expects a healthy bounce in growth in the second quarter then a marked throttling back.
Trade figures from France, Britain and Portugal give an opportunity to see if there is any “rebalancing” going on within Europe – the argument being that the euro zone in particular can only thrive if Germany’s massive surpluses shrink a little just as the high debt countries try to pare their deficits. That requires Europe’s largest economy to buy a little more from its currency area peers. The German data showed imports from states in the single currency bloc up 5.4 percent year-on-year in April so maybe there are glimmers of movement.
German industrial output, due later this morning, will be another important snapshot after industry orders dropped sharply in April. Elsewhere, Spanish industry output data, which showed the slowest fall in 19 months in March, will indicate whether a deep recession is close to hitting bottom. Spain has enacted painful cuts and reforms but the resultant easing of its labour laws has helped its export base, and inward investment, pick up.
In summary, we clearly need a German trunk pulling together all the various strands and it may well be we could take a look at euro zone imbalances via the trade data too, maybe centred on Paris.