Export Dominated Growth In Germany and Japan

Well it is now more or less official, growth in the fourth quarter was largely a story of strong export performance in both Germany and Japan. Domestic consumption remained congenitally weak in both cases.


In Germany, as Bloomberg reports:

Booming exports drove an unexpected acceleration in German economic growth in the fourth quarter, capping the best year for Europe's largest economy since 2000. Sales abroad jumped 6 percent from the third quarter, the Federal Statistics Office in Wiesbaden said in a detailed report on the fourth quarter today. Private consumption rose 0.3 percent. The economy grew 0.9 percent after 0.8 percent expansion in the previous quarter

As the Federal Statistics Office makes clear growth was largely a story of exports (and the domestic capital expenditure necessary to fuel them) and demestic consumer demand (when you strip out an element for the advance purchasing influenced by the VAT hike) was virtually flat:

As regards GDP use, growth in the fourth quarter of 2006 was based both on domestic and foreign demand, as was the case in the quarter-on-quarter comparison. However, also in a year-on-year comparison, the particularly dynamic foreign trade contributed by far more to the economic upturn in the reference quarter than did domestic demand: The continuing demand from abroad produced two-digit growth rates, which were even much higher for exports (+15.9% in real terms) than for imports (+10.3%). The resulting export surplus (net exports) contributed 2.8 percentage points to economic growth. As mentioned above, the strong increase in exports was positively influenced by belated declarations received in foreign trade statistics.

The 15.9 % y-o-y increase in exports is large indeed, and does raise the question as to such whether such rates of increase can be sustained going forward.

In the case of Japan, again as Bloomberg points out:

Japan reported an unexpected trade surplus for January, buoyed by a 50 percent surge in exports to China and a drop in oil imports.The surplus was 4.4 billion yen ($36 million), compared with a deficit of 353.5 billion yen the same month a year earlier, the Ministry of Finance said in Tokyo today. Exports climbed 18.9 percent, twice as fast as economists expected.

So here again the increase in exports is pretty massive - 18.9% y-o-y - and the same sustainability issues arise. What is strange about all of this is how few commentators seem to be picking up on the underlying picture.