Oct 05, 2022

Germany Exports Up as Euro Devalues

Of course the US and China (Yuan is pegged to USD) will scramble to buy cheaper Euro denominated goods.

Germany, the third largest exporter in the world, reported exports data today that beat expectations from analysts.

Well of course, why wouldn't Germany export more? The Euro has tanked so everything coming out of the EU against USD/CAD/AUD/INR/CNY is significantly cheaper. You would expect higher exports as a currency devalues.

If you dig into the underlying data you find a breakdown of EU vs outside (third) country imports/exports...

Compared with July 2022, exports to third countries increased by 4.7% and imports from those countries by 4.2%.

Most German exports went to the United States in August 2022. 12.0% more goods were exported there after seasonal and calendar adjustment, compared with July 2022.

Of course the US and China (Yuan is pegged to USD) will scramble to buy cheaper Euro denominated goods.

But within the EU bloc it's not as rosy...

The value of the goods exported to euro area countries totaled 51.0 billion euros (-0.6%) and the value of the goods imported from there was 43.2 billion euros (+2.9%).

The piece to keep an eye on, in my opinion, is third country imports. Up, but at what real cost? The loss of purchasing power from the Euro is staggering so EU countries are paying more for less. All while money is becoming more expensive.

The German equity market hasn't broken down the way you'd expect if investors were fearing that local industry would grind to a halt and here you have headline exports beating expectations. That hold up has been fairly surprising imo.

The MSCI German index, a bit broader and denominated in USD...

The MSCI Germany Index is designed to measure the performance of the large and mid cap segments of the German market. With 60 constituents, the index covers about 85% of the equity universe in Germany

It has lost over 40% of it's value.

Don't let the economy surprise you.

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