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German export growth beats expectations, trade surplus rises

Germany’s exports grew more than expected in May compared to the previous month, exceeding the rate of increase in imports and pushing the country’s trade surplus higher.

German exports grew by 1.4 per cent in May, faster than the 0.9 per cent rise in April. The Federal Statistical Office said that imports into Germany were up by 1.2 per cent in May, resulting in the trade surplus increasing to €20.3 billion from €19.8bn in April. On an annual basis, exports grew 14.1 per cent, improving from a 2.9 per cent decrease in April. On the other hand, growth of imports accelerated sharply to 16.2 per cent from 5.4 per cent.

In the meantime, the Office for National Statistics said that household incomes in the UK are being squeezed, although the unemployment rate has fallen to its lowest level in 42 years, while the employment rate was the highest on record. In the quarter to May, the unemployment rate fell to 4.5 per cent, down by 0.2 per cent from the previous three-month period. Markets were expecting that the rate would remain at 4.6 per cent, as seen in the three months to April.

The number of unemployed people fell by 64,000 from the previous quarter to 1.49 million. Employment rose by 175,000 to 32.01 million.

The positive news contrasts with other figures showing a slowdown in the UK economy, although employment figures often lag developments in the wider economy.

Finally, Federal Reserve chair Janet Yellen, in her semi-annual congressional testimony, said that the US economy is growing stronger while employment is expanding. Yellen said she foresees only “gradual” rate hikes in the next few years to sustain the economic expansion. Slow wage growth and subdued inflation have confused and upset economists given the very low unemployment rate which would normally foster “a stronger pace of wage and price increases.”

Yellen cautioned that although the Fed’s measure of inflation has been low recently, “it’s premature to reach the judgment that we’re not on the path to two per cent inflation over the next couple of years”. She added that they are very committed to achieving the two per cent inflation target.

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

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