The latest statistics from the Organisation for Economic Co-operation and Development (OECD) indicate that, in current US dollar terms, the growth of merchandise exports by G20 countries flattened in the second quarter following an increase in the previous quarter. The main reason for the slowdown in growth was a decrease in exports from the European Union, primarily reflecting a reduction in sales in Germany.

However, in terms of imports, G20 countries achieved a positive growth of 1.2% in merchandise imports after seven consecutive quarters of negative growth, mainly driven by strong imports from the United States and the United Kingdom.

At the same time, both exports and imports of service trade within the G20 group slowed down in the second quarter, with the growth rates for exports and imports easing from 3.4% and 3.7% in the first quarter to 1.9% and 1.1%, respectively.

Why did German exports decrease in the second quarter?

In terms of imports, the European Union recorded a positive growth of 0.2% for the first time since the second quarter of 2022.

However, in the second quarter, EU exports decreased by 0.9%, which mainly reflected the situation in Germany, where sales of chemicals and other manufactured goods declined.

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Previously, the Federal Statistical Office of Germany released trade data for the first half of 2024, showing a decline in both imports and exports for Germany. Specifically, Germany's export volume for the first half of the year was €801.7 billion, a year-on-year decrease of 1.6%, with the United States remaining the largest buyer of German products; Germany's import volume for the first half of the year was €662.8 billion, a year-on-year decrease of 6.2%, with China being the top country for German exports.

In detail, for the first half of 2024, the most important export goods for Germany were automobiles and automotive parts, with an export volume of €135.3 billion. Compared to the first half of 2023, automobile exports decreased by 2.4%.

Machinery ranked second with an export volume of €109.6 billion (a year-on-year decrease of 4.4%). The export of chemical products also showed a similar trend, with an export volume of €75.1 billion in the first half of 2023, which dropped to €71.8 billion in the first half of this year, equating to a 4.4% decrease.

Data from the Federal Statistical Office of Germany shows that in the first half of the year, Germany's largest export surplus was in automobiles and automotive parts, amounting to €62.3 billion, followed by machinery at €59.7 billion. In contrast, in the trade of crude oil, natural gas, and agricultural products, the volume of imported goods significantly exceeded that of exported goods. The total import surplus amounts were €32.5 billion and €13.9 billion, respectively.The Federal Statistical Office of Germany has indicated that in the first half of the year, the majority of Germany's export trade was shipped to the United States. "As in previous years, the United States was the most important buyer of German goods in the first half of 2024. Germany exported goods worth €80.7 billion to the United States. France (€62.4 billion) and the Netherlands (€57.6 billion) were Germany's second and third-largest export countries, respectively."

Simultaneously, "In the first half of 2024, the majority of Germany's imports originated from China (€73.5 billion). The Netherlands (€49.6 billion) and the United States (€46 billion) were Germany's second and third-largest suppliers, respectively," according to the Federal Statistical Office.

Shi Shiwei, a visiting researcher at the Institute for Modern China Studies at Freie Universität Berlin, told Yicai Global that the reason the United States has become Germany's largest buyer currently is also related to the U.S. reindustrialization strategy, such as increased purchases of steel equipment.

He also explained to the reporter that the ongoing energy crisis in Germany, as well as issues with the inadequate replacement of traditional energy sources with new energy sources, have had a certain impact on the industrialization within Germany. Discussions within Germany on deindustrialization reveal that industry has always been the pillar of the German economy, accounting for about 24% of its Gross Domestic Product (GDP). The current discussions suggest that this figure may decrease, but compared to the UK and the U.S., Germany's level of industrialization remains high.

Regarding other G20 countries in other regions, in the second quarter of 2024, among the G20 countries in North America, the growth of U.S. goods exports stagnated, partly due to a decline in exports of industrial goods and materials. Canada's exports declined, mainly due to a trend of decreasing imports in the automotive and mineral sectors. However, North America saw an increase in imports in that quarter, particularly in the import of capital goods such as electrical equipment.

Furthermore, OECD data shows that in the second quarter, in East Asia, the export growth of goods from China and South Korea was robust, driven by sales of automobiles, semiconductors, and high-tech equipment. In contrast, Japan's exports fell by 2.1%, partly due to the closure of a large automobile factory and the weakening of the yen. Following a negative growth in imports in the first quarter of 2024, imports in East Asian G20 countries rebounded in the second quarter.

G20 Service Trade Growth Slows

OECD data indicates that in the second quarter of 2024, U.S. service exports grew by 1.4%, mainly driven by an increase in revenues from information and communication technology and other business services, while service imports grew by 1.5%.

In contrast, Canada's service exports and imports decreased by 0.4% and 1.8%, respectively.

In Germany, tourism has driven the growth of service trade imports and exports, with the latter possibly reflecting a significant increase in tourism revenues following the European Football Championship. Conversely, France has experienced a contraction in both its service exports and imports.Due to strong spending on other business services and intellectual property services, UK exports saw a moderate increase (2.3% growth), while imports grew by 2.8%.

In Japan, service exports increased by 1.6%, mainly driven by high earnings in transportation and other business services, while imports remained flat. In South Korea, service exports grew significantly, driven by transportation (especially freight), tourism, and information and communication technology services, while imports experienced a moderate increase.

In India, service trade surged, with exports and imports growing by 4.4% and 6.2%, respectively.

However, when looking at long-term data, the growth rate of service trade still exceeds that of goods trade.

Oxford Economics Senior Economist Slater previously told Yicai reporters that since 2011, the growth rate of service trade has consistently been higher than that of goods trade, with annual growth rates of around 4% and 3%, respectively. This unexpected performance has continued into 2022-2023, although this partly reflects the strong rebound of service trade from the low levels during the pandemic period.

He stated that a potential positive structural factor for global trade is the increasing tradability and trade in services. Overall, service trade is less susceptible to certain structural influences.