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Investing.com -- German exports fell in May as the reversal of a frontloading effect continued to impact the export sector, wiping out gains seen earlier in the year.
Exports decreased by 1.4% month-on-month in May, following a 1.6% decline in April.
This drop completely erased the surge in exports that occurred in February and March due to frontloading.
At the same time, imports saw a steeper decline of almost 4% month-on-month, which widened Germany’s trade surplus to €18.4 billion.
The United States remains the most important destination for German exports despite this reversal.
Data suggests that the earlier boost to exports was almost exclusively driven by US frontloading, an effect that has now dissipated.
Looking forward, German exports face significant challenges, according to ING analysts.
The risk of potential tariffs continues to threaten German and European exporters.
Additionally, the strengthening euro, both against the US dollar and in nominal effective terms, is creating further concerns for exporters.
With economic data now available for the first two months of the second quarter, ING analysts believe the German economy appears headed for another period of stagnation or possibly a slight contraction.
While retail sales and construction activity declined compared to the first quarter, the modest increase in industrial production is insufficient to offset the expected negative impact from trade.
Given the current high uncertainty and volatility, it’s premature to definitively predict a contraction for the second quarter.
Despite rising optimism and signs of a potential turning point, ING says the German economy will likely need to wait at least another quarter before hard data begins to reflect the improving sentiment indicators.
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