-Christian Schulz, Berenberg Bank
German trade data surprised analysts to the downside, with exports and imports falling much more than expected in May, following other soft numbers that added to signs Europe's number one economy is losing steam. The Federal Statistical Office said that exports were down 1.1% to 92.8 million euros from the previous month compared to a 0.4% decline economists expected. Exports, the German economy's backbone, struggled last year and declined three of the first five months this year. Meanwhile, imports fell faster than exports, dropping 3.4% to 74.1 billion euros. The seasonally adjusted trade surplus widened to 18.8 billion euros in May from 17.2 billion euros a month earlier. In the first quarter the European powerhouse grew 0.8%, with the Bundesbank expecting an annual growth rate of 1.9% this year.
Meanwhile, the second biggest European economy grew 0.2% in the second quarter after it stalled in the beginning of the year, while the country's trade deficit rose to 4.9 billion euros in May compared to 4.1 billion euros a month earlier. Separately, the Finance Ministry reported a fall in budget deficit to 64.3 billion euros at the end of May from 72.6 billion euro deficit a year earlier. President Francois Hollande has tried to boost growth and hiring by pushing through payroll tax cuts, but the impact has yet to show in economic data.
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