China pulls German trade up, but Brexit hits UK business

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German exports rose in February, boosted by surging trade with China in a fresh sign that factories are busy in Europe’s largest economy despite a sharp drop in trade with the United Kingdom after Brexit.

Seasonally adjusted exports increased by 0.9% on the month after an upwardly revised rise of 1.6% in January, the Federal Statistics Office said on Friday. Imports rose 3.6% after falling 3.5% in the prior month.

A Reuters poll had pointed to a 1.0% increase in exports and a 2.4% rise in imports. The trade surplus shrank to 19.1 billion euros. On the year, exports to China increased by 25.7%.

German exports to the United Kingdom fell by 12.2% on the year in February and imports slumped 26.9%, the German Federal Statistics Office said. Germany is the UK’s biggest trading partner.

Exports to other EU states dipped 0.3% on the year and imports rose 0.7%.

The UK left the European Union’s single market at the end of last year, raising barriers to trade. That final split followed more than four years of wrangling over its terms of exit from the EU, during which German businesses had already begun to reduce their interactions with Britain.

“German companies are benefiting from strong foreign demand… even if there are setbacks at the moment, things tend to look good for German industry,” Thomas Gitzel at VP Bank said.

Separate data released on Friday showed industrial output in February fell by 1.6%. A Reuters poll had pointed to a rise of 1.5%. Economists expect the economy to contract in the first quarter.

“What is currently weighing on German industry is not a lack of demand, it is rather supply bottlenecks for raw materials and components,” Andreas Scheuerle at DekaBank said.

Last month, BMW said it was back on a profitable track in 2021 after recovering from shutdowns and a serious dent to sales due to the COVID-19 pandemic in the first half of last year.

Main photo: A German (L-R), Chinese and European flag in front of the Chancellery next to the Reichstag building in Berlin, Germany. EPA/CLEMENS BILAN