Amid signs that the economic recovery in the euro area is continuing, Germany’s trade surplus rose to €15.6 billion in August from €15 billion the previous month. This topped consensus estimates of €15.1 billion.

The euro area is Germany’s biggest trading partner. Exports, adjusted for working days and seasonal changes, recovered to rise by one per cent month-on-month from a fall of 0.8 per cent. Economists polled by Bloomberg News expected a gain of 1.1 per cent.

Imports, on the other hand, rose by 0.4 per cent compared with a rise of 0.3 per cent in July. The report showed that Germany’s trade surplus narrowed to €13.1 billion in August from €16.2 billion in July. The current account surplus, a measure of trade which includes services, was €9.4 billion, down from €14.2 billion.

Meanwhile the UK recovery may not be as strong as thought, with industrial production surprisingly dropping 1.1 per cent month-on-month in August.

According to the Office for National Statistics, in July, industrial production gained 0.1 per cent. The median forecast of economists in a Bloomberg News survey was for a rise of 0.4 per cent.

Factory production fell 1.2 per cent, while a separate report showed the trade gap widened in the three months through August. These figures suggest the industrial sector is lagging behind other sectors. In the meantime, the Bank of England maintained its low interest rate policy during the Monetary Policy Committee meeting held last week.

Finally, according to the minutes published, most members on the interest rate setting Federal Open Market Committee (FOMC) expect the tapering of the US Federal Reserve’s quantitative easing programme to start this year, with the decision not to reduce the bond-buying last month being described as a ‘close call’.

FOMC members were aware that the non-taper would take the financial markets by surprise. Ultimately, with a number of members on the committee viewing the latest job data as disappointing, the majority thought it ‘prudent’ to hold steady.

This article was compiled by Bank of Valletta for general information purposes only.

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