How Can Chinese and German Exports Rise?

The Federal Statistics Office in Germany said exports rose 1.6% in February, compared to January. Also, the country’s trade surplus rose to 14.7 billion euros. The EU economy is too weak for the rise in exports to be credited there, though. At nearly the same time, China reported its February exports rose 8.9% from the same month a year ago. The strength of both numbers was attributed to the once-again powerful U.S. economy, as well as to emerging markets. The world outside the European Union must be growing faster than forecast.

U.S. gross domestic product has continued to rise at about 3%, most economists believe. The nominal GDP of the United States is about $14.7 billion. So, the 3% improvement, while impressive, cannot carry China and Germany on its own. Japan’s economy is not healthy, to a large extent because of the huge earthquake there in March 2011. That leaves Brazil, Russia and India as the only major economies outside those already mentioned.

There are fears that the economic growth of the largest developing nations has slowed some. For example, India’s GDP for the past quarter was a bit below forecast. Russia recently cuts its GDP forecast for this year to 3.4%, not much better than the expansion speed of the larger United States.

Because of all of these measurements of national GDP expansion power in some countries and anemia in others, it is hard to imagine how export giants Germany and China have done so well. Part of the answer likely will be that the U.S. economy has begun to sprint rather than walk ahead. It is possible that consumer spending has rebounded more sharply than most experts predicted. Retail numbers were better than expected last month. Americans have bought cars in remarkable numbers since the start of the year. Unemployment is still above 8%, but consumer confidence levels have brightened. The housing market still is deeply troubled, but many Americans have come to accept the fact that their homes have little or no equity. That is not normal compared to the past several decades, but homeowners seem to have become more realistic and less in despair.

It may take a quarter or two of GDP reports from the U.S. and several developing nations to find nearly indisputable evidence of why exports from Germany and China have grown so much. But, it is likely that American buying power is most of the cause.

Douglas A. McIntyre