Germany's trade surplus surpassed expectations by nearly 2 billion in January as exports boomed to a 16-month high. Sales abroad grew by 3.8% as German firms saw ample demand in places like Russia and China to offset the slump in the US.
Euro bulls will find it encouraging that this occurred as the single currency tested 1.5000, having rallied some 17% against the greenback in 2007. Six weeks and 400 pips later, the question must surely be if the EZ's largest economy can maintain export growth momentum with the Euro at 1.5400.
While today's result certainly makes a powerful case for the resilience of Germany's exporters, it must also be noted that firms involved in international trade typically agree on a fixed exchange rate as part of the terms of a given deal. This means that it can take some time for the effects of an appreciating currency to be felt by the export sector as contracts expire and deals are re-negotiated. Continued US slowdown and rising energy costs will only add more cloud-cover to Germany's seemingly sunny prospects. If current trends continue to develop along the same trajectory, it seems unlikely that stellar export growth of the sort we saw today can endure much longer.
