The German Downturn: Analyzing Export Performance and Beyond (SNN#26)


Spaceknow’s indices for Germany show a stumbling economy. These indices provide valuable insights and data for analyzing economic trends and performance, including manufacturing output, autos, services, retail sales, trade, new orders, and construction.

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After years of driving economic growth, Germany’s export engine has been underperforming recently. German exports to China are falling by almost 11 percent year-on-year, as the market share for German carmakers decreases. Additionally, German chemical companies are facing challenges due to rising gas prices. Overall, German exports have dropped by over 5% in March compared to the previous month. For all non-EU countries, the decline is even more significant at -5.7% compared to the previous month and -2.0% compared to the same month a year ago.

Spaceknow monitors various aspects of the German economy and has developed a range of satellite data-based indices. The product also provides one-step ahead predictions for some benchmarks (using our satellite indices as input). These include measuring various logistic centers and container storage locations in Germany. Our port container index proved to be a valuable tool for investigating exports across multiple countries. Figure 1 graphs the  Spaceknow Port Container index versus the value of goods exported from Germany in US dollars. As the index monitors square meters covered by transportation containers in key German ports, it works best with the real values of exports, excluding the effect of rising prices of goods. Figure 1 shows the index can track German exports (especially after Covid) even though a large portion of German goods are transported via road to neighboring countries.

Figure 1: 30-day moving average of Port Container Index and CPI inflation-adjusted Exports for Germany (Spaceknow, OECD)

In line with the actual values of German exports, our Port Container index continues to experience a decline on both a monthly and year-on-year basis. Prior to seasonal adjustment, the index recorded a 6 percent drop in April compared to the same period last year, and a 4.1 percent decrease in Q1. These figures indicate a decrease in demand, leading to a decrease in container activity at German ports. Figure 2 below illustrates the development of the Port Container index over several years, highlighting the significant decline in index values for 2023 compared to the previous year, closely resembling the levels observed during the COVID-impacted year of 2020. The blue line representing 2023 suggests that the index reached its lowest point in late May after a prolonged downturn that began in March. Consequently, we anticipate that the May figures for German exports will continue to be disappointing both in month-on-month and year-on-year comparisons. However, we expect the activity to gradually increase once again in June.

Figure 2: 30-day moving average of Port Container Index, comparison between 2022 and 2023. May 24 is the last date for 2023 (Spaceknow).

Moreover, Germany is facing the challenge of a broader economic downturn caused by persistent inflation and the disruption of Russian gas supplies as a result of the invasion of Ukraine. These factors have contributed to the country’s recession in the first quarter of the year. The economy contracted by 0.3% between January and March, following a 0.5% contraction in the previous quarter. High inflation rates, particularly in April (7.2%), have impacted household spending on items like food or clothing, while industrial orders have weakened due to higher energy prices. Household spending and government spending both decreased, and car sales declined after reductions in government grants for electric and hybrid vehicles. Private sector investment and exports showed some growth but were insufficient to prevent Germany from entering a recession. The German central bank expects modest growth in the second quarter, driven by a rebound in industry. However, the International Monetary Fund (IMF) predicts a 0.1% contraction for Germany this year, making it the weakest among advanced economies.

Figure 3: German Auto Exports (number of units) and Spaceknow prediction using Aggregated Supervised Multi-index Model

Figure 3 presents Spaceknow’s multi-input supervised index, which has been trained to forecast monthly German Auto Exports. The index utilizes a combination of Spaceknow Nowcasting indices, such as car production, inland logistics centers, and port containers, along with additional indices, to train the model. In Figure 3, we observe an out-of-sample prediction of car export volumes from Germany generated by this model. Notably, the model accurately predicts the recent decline in export activity, demonstrating its effectiveness in forecasting trends. The latest available prediction suggests that the export numbers could start improving again.

As already mentioned, fierce competition in the Chinese market is a key factor contributing to the falling German exports. According to data from Germany’s automobile association VDA, their total market share rose from 19.9% in 2015 to 24.6% in 2019. However, it has since declined, falling back to 19.1%. German car companies strive to maintain their market dominance in the electric age. Chinese consumers are driving the trends that will shape the future of the automotive industry. While German cars were once seen as the pinnacle of global engineering, the shift to the electric age has positioned Chinese counterparts as leaders in EV technology. With a heavy reliance on China for a third of their passenger vehicle sales, German companies have a lot at stake. Moreover, the German government canceled some EV-related subsidies causing a significant decline in new electric vehicle registrations in Germany. In January, registrations for battery electric vehicles dropped by approximately 83%, from 104,300 in December to 18,100. The share of e-cars also decreased from over 55% in December to 15% in January..

The recent data indicates a potential structural shift in the German economy, which could place unexpected pressure on the manufacturing powerhouse. Experts suggest that Germany’s economic struggles are not a temporary setback but may reflect deeper structural weaknesses and a lack of clear solutions to address them. The ongoing war in Ukraine, demographic changes, and the energy transition are expected to have long-term implications for the German economy. Despite some relief from a mild winter and China’s economic recovery, the outlook remains challenging, with Germany likely to continue being a drag on overall economic prospects in the entire eurozone, given its significant role as the bloc’s largest economy and trading partner for many EU countries. Spaceknow continues to monitor diverse aspects of the German economy and has recently created new series and supervised indices to track GDP, including manufacturing output, autos, services, retail sales, trade, new orders, and construction. We expect to launch our comprehensive Global Auto database soon, which will provide detailed coverage of key German automotive brands.

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