EcoWeek

The impact of the war in Ukraine has been more pronounced than expected 

EcoWeek 22-24 // 13 June 2022  
economic-research.bnpparibas.com  
6
ECONOMIC PULSE  
GERMANY: THE IMPACT OF THE WAR IN UKRAINE HAS BEEN MORE PRONOUNCED THAN EXPECTED  
The negative prospects for the second quarter of 2022 are no longer a risk as suggested by business surveys, they are now taking concrete shape in  
Germany. After the very sharp worsening in the trade balance in March (a 4% decline in exports in volume terms and a symmetrical 4.1% increase  
in imports), it barely improved in April and remains at an extremely low level. According to the Kiel Institute’s real-time forecasts, exports probably  
fell in May (-1.7% m/m) but will see a slight recovery in June (0.6% m/m). Over the second quarter as a whole, Germany’s trade balance could shrink  
to its lowest level since Q2 2001.  
These trade difficulties have come against a background where demand addressed to Germany by its main trading partners is falling, as indicated by  
another fall in orders received by industry in April (-2.7% m/m). Although order books remain satisfactory, the deterioration since February has been  
swift. In addition, the details of this fall are sobering as the biggest drops have come in capital goods (-4.3%), followed by consumer goods (-2.6%),  
a sign that consumption is not the only component to be affected but that business investment is now also suffering from the situation, with the  
postponement of a number of investment projects.  
Supply difficulties also continue to weigh on manufacturing production, which struggled to recover in April (0.4% m/m) and is still well below its  
pre-Covid levels (-6.1% relative to Q4 2019). The biggest hit has come in the automotive sector, where, in addition to semiconductor shortages, there  
are now bottlenecks in the supply of cable looms which had been supplied by Ukraine. The result of this is that new car registrations continued to  
fall in May (-10.2% y/y). Germany’s automotive industry association (VDA) is concerned about the weakness of sales: only 1 million units were sold  
in the first five months of the year, 33% below the 2019 figure.  
Nor are we seeing better signals in the area of consumption. Although household spending on services is likely to hold up, benefiting from substantial  
accrued growth since the relaxation of health protection measures at the beginning of the year, consumption has slipped considerably (retail sales  
were down 5.4% m/m in April).  
Lastly, the German economy has been hit harder than expected by the repercussions of Russia’s war in Ukraine. At the beginning of the conflict, initial  
estimates of the impact of an embargo on Russian energy put the reduction in 2022 growth at around 2 percentage points (Bachmann et al 2022).  
In reality, the effect has been much more severe, even though the embargo is not yet effective. The OECD now forecasts GDP growth of only 1.9% in  
2
022 and 1.7 % in 2023 in its June economic outlook (compared respectively to +4.1 % and +2.4 % in December 2021).  
Anthony Morlet-Lavidalie  
GERMANY: QUARTERLY CHANGES  
3
-month moving average (actual)  
Effective  
Exchange Rate  
--- 3-month moving average (4 months ago)  
6
4
2
0
.0  
.0  
.0  
.0  
IFO Business Climate  
Manufacturing  
Unemployment Rate  
Industrial Orders  
Core HICP  
foreign  
-
-
-
2.0  
4.0  
6.0  
GFK Consumer  
Confidence  
Industrial  
Production  
New Orders  
Construction  
Retail sales  
IFO Business Climate  
Trade  
IFO Business Climate  
Construction  
IFO Business Climate  
Services  
SOURCE: REFINITIV, BNP PARIBAS  
The indicators in the radar are all transformed into ‘z-scores’ (deviations from the long-term average, as standard deviations). These z-scores have mean zero and their values  
are between -6 and +6. In the radar chart, the blue area shows the actual conditions of economic activity. It is compared with the situation four months earlier (dotted-line). An  
expansion of the blue area compared to the dotted area signals an increase in the variable.  
The bank  
for a changing  
world  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
Ce site présente leurs analyses.
Le site contient 1811 articles et 362 vidéos