A Mercedes Benz production line in Rastatt, Germany
A Mercedes Benz production line in Rastatt, Germany. Many of the country’s large companies have been hit hard by a cooling global economy and trade disputes. Image Credit: AFP

BERLIN: Germany’s trade surplus narrowed in the first half of the year as strong domestic demand led to imports growing faster than exports, adding to signs that Europe’s largest economy is slowly reducing its dependence on foreign sales.

The International Monetary Fund and the European Commission have urged Germany for years to do more to lift domestic demand as a way to boost imports, stimulate growth elsewhere and reduce global economic imbalances.

As a slowing world economy, trade disputes and Brexit uncertainty take their toll on Germany’s traditionally export-reliant economy, record-high employment, inflation-busting wage hikes and low borrowing costs provide a buffer against external headwinds.

The Federal Statistics Office said on Friday that imports rose 3.0 per cent to 556.2 billion euros ($622.2 billion) in the first six months. Exports grew 0.5 per cent to 666.1 billion euros.

Year on year, the trade surplus narrowed to 109.9 billion euros from 122.4 billion. The current account surplus, which measures the flow of goods, services and investments, fell to 126.4 billion euros from 130.6 billion, the data showed.

NEW DEBT?

Since 2011, Germany’s current account surplus has been consistently above the European Commission’s indicative threshold of 6 per cent of gross domestic product, reaching a record high of 8.9 per cent in 2015. It narrowed to 7.4 per cent in 2018 and is expected to shrink further.

In a sign that Germany is willing to do more and reduce its trade surplus further, a senior government official told Reuters that Berlin is considering ditching its long-cherished balanced budget policy to help finance a costly climate protection programme with new debt.

In June alone, seasonally adjusted exports were down 0.1 per cent on the month while imports rose 0.5 per cent. The trade surplus stood at 18.1 billion euros.

A Reuters poll of economists had forecast a 0.1 per cent drop in exports and a 0.3 increase in imports. The trade surplus was expected to come in at 18.6 billion euros.

Carsten Brzeski, from ING-Diba, said the weak export figures had made a small contraction in the economy more likely in the second quarter.

“All in all, today’s trade data marks the end of a disappointing second quarter,” he said.

The Federal Statistics Office will release preliminary gross domestic product figures for April-June next Wednesday.