General   (General discussion, talk about anything.)

Overall things are looking worse in the EU.

From the Financial Times.


Germany’s political and business leaders warned that the country was facing its biggest economic crisis for decades as soaring energy prices and disruptions to trade pushed the country into a monthly trade deficit in goods for the first time in more than 30 years.
The rise in energy prices increased the cost of imports to Europe’s largest economy in May, while global trade disruption weighed down exports, causing a $1bn deficit — the first since 1991. The figures contrasted with years in which Germany’s manufacturing exports drove the country’s growth and made it the powerhouse of the EU economy.
Warning on Monday that Germany faced a “historic challenge”, chancellor Olaf Scholz added that “the crisis won’t pass in a few months” because Russia’s war in Ukraine “has changed everything, and supply chains are still disrupted by the pandemic”.
The sanctions imposed on Moscow by western countries have also hit trade, along with China’s coronavirus lockdowns, squeezing demand for goods from Germany’s export-focused economy.
Scholz was speaking after talks with trade union leaders, economists and employers’ groups aimed at tackling the cost of living crisis.
Rainer Dulger, head of the Confederation of German Employers’ Associations, said after Monday’s meeting held by Scholz that Germany was facing the “toughest economic and social crisis since reunification”.
“Difficult years lie ahead of us,” he added. “We can no longer take for granted the continuous economic growth that we experienced before the Covid-19 pandemic and the Ukraine war.”
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Imports increased 2.7 per cent to €126.7bn from April to May while month-on-month exports fell 0.5 per cent to €125.8bn, according to data released on Monday by the federal statistical agency.
“Germany’s trade surplus has now evaporated, thanks mainly to soaring
imports, offsetting otherwise decent momentum in exports,” said Claus Vistesen, an economist at Pantheon Macroeconomics. He added that he
expected the country to continue running a trade deficit over the summer.
May’s fall in overall German exports was partly because of a 2.8 per cent monthly drop in exports to other EU countries, while imports from those countries increased 2.5 per cent. Exports to the US increased 5.7 per cent and those to China were up 0.5 per cent, but exports to the UK fell 2.5 cent.
“In the past. Germany could always rely on strong exports to revive the economy and today’s numbers show the trade balance will not return as a positive element for growth for at least the next couple of years,” said Carsten Brzeski, head of macro research at ING.
Economists expect high energy prices and weak exports to hit German growth this year. ING is forecasting German gross domestic product will shrink in the second quarter and Brzeski said: “There is a high probability that Germany and the rest of the euro area will enter recession this year.”
Dulger said companies “don’t know which fire to put out first”. He said there was a “shortage of skilled workers, material and staff, and supply chains are in tatters. It will remain a challenge to keep firms open.”
Prices of German imports rose more than 30 per cent in the year to May — reflecting soaring energy and commodity prices — while export prices rose almost 16 per cent. While trade data is reported on a nominal basis, the data is adjusted for inflation when calculating GDP.
German exports to Russia recovered some of their recent falls, rising almost 30 per cent from the previous month to €1bn, but they remain less than half the level of a year ago. German imports from Russia fell almost 10 per cent to €3.3bn. Moscow has cut the supply of natural gas to Germany in recent weeks, raising fears of shortages that could force some industrial production to be shut down.
Many German companies announced they were severing ties with Russia after the EU imposed sanctions on thousands of Russian individuals and businesses. Brussels plans to ban EU imports of Russian oil as part of a sixth package of sanctions against Moscow.
There has been a similar deterioration in the trade balance of the overall eurozone, which had a trade deficit in goods of €32.4bn in April, a reversal from a surplus of €14.9bn a year earlier. Eurozone trade figures for May are due to be released on July 15.