Global trade rebound fuels rise in German and French exports

German and French exports rose in July as global trade rebounded from pandemic-hit lows this spring, in the latest sign that the eurozone’s economy is heading for a strong recovery in the third quarter of this year.

German exports rose 4.7 per cent month-on-month in July, their third consecutive increase, widening the country’s trade surplus to its highest level since February, while in France, exports grew 9.6 per cent.

The figures came as estimates of the economic impact of the pandemic on the eurozone’s economy were revised downwards. Eurostat on Tuesday said there had been an 11.8 per cent contraction in gross domestic product in the second quarter of this year compared with the previous three months — slightly less severe than its initial estimate of a 12.1 per cent decline. 

The French statistics office said on Tuesday that the country’s economic activity had recovered to about 95 per cent of pre-crisis levels in August. 

However economists have warned that the pace of improvement may be starting to slow.

The growth in German exports was slower than the last two months and overall they remain 11 per cent below the level of the same month last year, while French exports remain 17 per cent below last year’s level.

German exports to China were down only 0.1 per cent year-on-year in July, in marked contrast to its exports to the US, which were down 17 per cent, and to the UK, which were 12.6 per cent lower. German exports to other EU countries were down 9.6 per cent.

“While today’s numbers are good news for our call of surging GDP growth in the third quarter and suggest that the export sector is flourishing again, we should not get carried away,” said Carsten Brzeski, economist at ING. “They are still part of the mechanical rebound.”

In Italy, retail sales ended two months of improvement with a 2.2 per cent fall in July from the previous month, raising fears about the fragility of the recovery in the eurozone’s third-biggest economy that risks widening the bloc’s north-south gap.

July’s Italian retail sales were 7.2 per cent below the same month last year, official data showed on Tuesday. By contrast, retail sales in France and Germany have already bounced back to pre-pandemic levels.

Nicola Nobile, economist at Oxford Economics, said: “Overall, we maintain our view that, after the strong rebound in the third quarter, the subsequent quarterly gains in the Italian economy in the fourth [quarter] and through 2021 will be much more modest.”

Policymakers at the European Central Bank are set to discuss whether the recent rise in the euro risks hampering eurozone exporters when they meet on Thursday to discuss monetary policy. 

Meanwhile Europe’s jobs market remains gloomy.

The number of people in employment in the EU fell 2.9 per cent in the second quarter of the year, up from its initial estimate of 2.8 per cent, Eurostat said. The number of hours worked fell 10.7 per cent in the EU and 12.8 per cent in the eurozone after millions of people were put on government furlough schemes.

The French statistics office Insee forecast on Tuesday that unemployment would rise from 7.1 per cent in the second quarter to 9.5 per cent by the end of the year. The French economy will grow 17 per cent in the third quarter to end the year 9 per cent smaller than it started it, Insee said.

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