German export growth overtakes UK

25 September 2017

  • BDO Export Growth Index for Germany rises to 106.6 while UK slips to 101.5
  • UK Export Price Inflation falls but remains well above the long-term trend
  • Despite UK export growth slowing, it continues to outperform the EU average

Germany’s export growth rate has overtaken the UK’s for the first time in 18 months, according to the latest European Export Index by accountants and business advisers BDO LLP. 

Germany’s Export Growth Index – which charts annual growth in total exports – has risen to 106.6 in the third quarter of this year, up from 101.6 in the previous quarter. The marked increase is attributed to the strong performance of Germany’s industrial firms, with export expectations at their highest in over six years following rising demand from the US for German industrial products. Spain’s exporting growth has also been robust. Its Export Growth Index sits at 103.6 for the second quarter running, well above the long-term growth trend. 

In comparison, the UK’s export growth rate is starting to slow down. The nation’s Export Growth Index fell from 104.8 to 101.5 in the third quarter of 2017. Previously the UK’s strong performance was spurred by the pickup in the global economy and the fall in the value of sterling which made UK products more attractive. However, as pressures from the UK economy’s high inflation push the price of products up, international markets are beginning to look elsewhere. 

The UK’s Export Inflation Index – which indicates the rate of year-on-year growth in export prices – has fallen from 114.0 to 110.5 this quarter. Nevertheless, it remains well above the long-term growth trend which is 100, after the Index reached its highest point in eight years in Q4 2016, suggesting that UK export prices will continue to increase at pace.

The make-up of UK exports has also been shifting over the years. In 1995, manufactured goods contributed to around 60%% of all UK exports. Today, manufacturers are responsible for less than 45% of UK exports, with motor vehicles – the most significant exported manufactured product - accounting for 12.7%. In 2016, over half of UK car exports were sold to the EU whereas just under 15% were sent to the US.

Despite the UK’s export growth rate slowing, it continues to outperform the EU. The EU Export Growth Index rose 5.4 points this quarter to 98.6. The rise signals a return to growth for the EU but the figure still falls under 100, indicating a rate of growth which is slower than the long-term growth trend for the EU. 

 Commenting on the findings, Peter Hemington, Partner, BDO LLP, said:  
“The post-referendum lift experienced by UK exporters is starting to wane as the high rate of inflation causes an increase in the price of products. German exporters are therefore better placed to take advantage of the renewed demand coming from across the Atlantic and it leaves UK exporters in a vulnerable position.”

To download BDO’s New Economy report and find out more visit www.neweconomy.bdo.co.uk

Ends
 

Overview of the BDO indices:

An overview of the Export Performance Indices are provided in the table below, detailing figures for the last four months quarters, to allow for comparison. 

 

Country

Q3 2017

(figures for this report)

Q2

2017

Q1

2017

Q4

2016

BDO Export Growth Index

EU

98.6

93.2

107.8

96.9

UK

101.5

104.8

109.3

107.5

Germany

106.6

101.6

100.5

98.1

France

99.7

99.8

96.6

97.2

Spain

103.1

103.1

106.9

99.0

Italy

99.5

101.2

104.7

98.0

BDO Export Inflation Index

EU

113.8

122.0

129.2

112.3

UK

110.5

114.0

123.9

126.7

Germany

121.4

109.3

109.3

97.7

France

101.4

110.8

118.1

96.1

Spain

100.0

94.9

99.7

88.3

Italy

103.5

104.8

89.1

89.3

 

Note to editors:

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high growth businesses that fuel the economy. 

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.
 

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Methodological notes

The BDO European Export Indices are prepared on behalf of BDO LLP by the Centre for Economics and Business Research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.

The indices are calculated by combining a range of up-to-date business surveys and hard economic data, from a European and country-specific sources to ‘nowcast’ annual growth in the current quarter. Using surveyed data from sources including the European Commission, IFO, CBI, ISTAT & the Bank of England, as well as trade statistics from the UN and national statistical agencies, Cebr forecasts the level of annual growth in both total exports and export prices

The surveys and historic hard data are combined and correlated against a time series of trade data, individually for export growth and export price growth. Cebr then calculates the strength of the relationship between these variables and the dependent variable, respectively export growth and export price growth for each of the two indices. The variables are then weighted together based on their correlations and strength of relationship. Using this, Cebr nowcasts the current level of export prices and total value of exports in the current quarter. While there may be some data from months within the quarter of release, a nowcasting exercise is used to project whole quarter figures. 
 
Once a quarterly figure has been calculated, the annual growth rate from the same quarter in the previous year is derived. Finally, the growth rate is scaled into an index with 100 as the average long-term growth trend of the country and 95 as the level dividing expansion from contraction. 
 
The process is repeated for all of the five largest economies in Europe, and the combined European Union. Long-term growth, represented by a reading of 100 in the index, is calculated at a EU level for exports and at a national level for export prices. 
 
The results are useful not only as snapshots of the current trends in the export markets of Europe’s largest economies, but also as indicators of turning points and leading indicators of growth.
 

Contacts

Alexander Dickie at Teneo Blue Rubicon on behalf of BDO LLP
Mob: 07876 287318
Tel: 0207 260 2700
Email: bdo@teneobluerubicon.com