What's going on?

Data out on Monday showed that Germany posted its first trade deficit since 1991 in May.

What does this mean?

Germany is renowned for its strong export economy, but a few factors are starting to chip away at that reputation. First, lockdowns in China caused demand from the East to crater. Second, Germany�s exports to Russia in May were less than half what they were at the same time last year, given all the war-related sanctions and disruptions. And third, the price growth of German imports � primarily energy and raw materials � completely overshadowed that of exports in May. That helped drive the total value of exports down 0.5% from the month before, even as imports climbed 2.7% � creating a deficit of around $1 billion.

Why should I care?

The bigger picture: Another day, another recession prediction.
Economists are expecting this deficit to hang around, with demand staying muted amid the global economic slowdown. Actually, they�re worried it might get even worse, with Russia at risk of cutting natural gas supplies yet again. That could push entire industries like aluminum, glass, and chemical production into collapse, denting Germany�s economic output and putting millions of jobs at risk. Economists, then, are predicting that the German economy will shrink this quarter, and probably even enter a recession later this year.

Zooming out: Turkey doubles down.
If Germany has problems, there isn�t a word for what Turkey has: data out on Monday showed that the country�s inflation rate hit nearly 80% last month. Its government is sticking to its guns on low interest rates, refusing to accept the widely accepted truism that hiking rates limits inflation. And the country has just poured fuel on the flames: it raised its minimum wage again last week, giving consumers more disposable income they can use to push prices even higher.