Coronavirus wipes out Germany's trade surplus in a month and anticipates a collapse of trade in the eurozone

* Exports in Germany in April sank a 31,1%.

* The biggest drop since at least 1950, when the historical series started

* Economic data points to biggest contraction since World War II

Exports in Germany during the month of April sank a 31,1%, the biggest decline since there are records, which go back to 1950. The coronavirus crisis in a single month has loaded the country's trade surplus, the country's growth engine, sowing doubts about the accuracy of the Merkel government's forecasts that have anticipated a drop in the GDP of the 6,3% for this year. The data in France has also been catastrophic in April. Next week the data for the euro area as a whole is published and the two largest economies in Europe point to a collapse in the trade of the European Union.

The first foreign trade figures of the European powers in April anticipate a much more violent blow to the economies than expected.. The Great Confinement that most European countries adopted to contain the pandemic devastated the internal flows of the euro zone and exchanges outside European borders.

The main exporter of the euro, Germany, registered a decrease in exports of the 31,1% in April, compared to last year, until the 75.700 billion. It was the biggest drop in the historical series dating back to 1950. While imports collapsed a 21,6% until the 72.200 millions, which is the worst record since 2009.

In just over two months, coronavirus has rolled out Germany's trade surplus, the true growth engine of the German economy. The positive balance of the trade balance stood at 3.500 million in April, in front of 17.800 million euros a year earlier and 17.400 millions of march. The Federal Statistical Office of Germany (Destatis) highlights that it is the smallest volume since December beginning of the century.

To get an idea of ​​the magnitude of the figures, During the previous crisis, German exports took five months to decrease by around a 26%. The percentage drop has been overcome in a single month. Merkel's government expects the economy to contract this year a 6,3%. The fall in GDP in the first quarter was 2,3%, and that the ravages of the pandemic only affected the last weeks of the period.

The trade figures released today anticipate a deeper crisis than previously anticipated. And that already the estimates of Berlin contemplate the biggest fall since World War II. Exports have a great weight in the country's product, represent around the 47% del START. The market consensus expected that exports had only fallen a 15,6% and imports a 16%. The average forecast for the trade surplus was 10.000 millions.

The export sector was the first to suffer the consequences of the pandemic, by the problems experienced in the supply chain when China, at the beginning of the year it had to start closing its factories. And now, exports experienced a drop in the countries' internal demand. The country's main trading partners registered sharp declines in exports. The US assumes the 9% of total foreign sales volume. Exports to the country fell by 35,8%. For France, the largest importer of goods and services within the euro zone, they collapsed a 48,3% and for Italy a 40%.

With the attention focused right now on the recovery of the activity, April trade data recalls that the slump in the economy has been much worse than governments expected. And the data available for May suggests a rebound in activity, but on the supply side. The number of new orders collected by the PMIs suggest that they continue to decrease, but at a slower pace.

El levantamiento de las medidas de bloqueo debería conducir a una fuerte recuperación en mayo y junio, but in regards to the export sector, there will be a temporary rebound, but the structural challenges, including trade tensions, Brexit and disruptions in the global supply chain, no son un buen augurio para las perspectivas a medio plazo”, Carsten Brzeski subraya, ING Chief Economist for the Eurozone.

In France, less dependent on foreign trade, It has also registered a serious drop in foreign activity. Exports in April have plummeted a 43,9% until the 23.700 millions, while imports made it a 39,3% until the 28.700 millions. The trade deficit increased to 5.000 millions.

The Bank of France predicts that the economy will fall a 10% this year, with a setback from 15% in the second quarter .The next 15 April the balance of trade of the euro zone as a whole is published.

Source: the Economist.- 09/06/20.