MTS Insights

Germany’s GDP increased +0.3% QoQ and +1.0% YoY in Q2 2026, with quarterly growth revised up from +0.2% as stronger exports and better-than-expected trade activity offset weak investment and subdued consumption.

• Price-, seasonally, and calendar-adjusted GDP rose +0.3% QoQ in Q2, +0.1 ppt above the preliminary estimate, while Q1 growth remained +0.4%, indicating that the economy maintained positive momentum through the first half of the year.

• Exports increased +2.0% QoQ, driven by a +2.6% rise in goods exports, while services exports were flat. Imports rose +1.5%, including +2.1% for goods and +0.3% for services, leaving foreign trade as a key source of support.

• Gross fixed capital formation declined -0.2% QoQ, with machinery and equipment investment falling -1.4%, while construction investment edged up +0.1%. Final consumption expenditure increased just +0.1%, with both household and government consumption rising +0.1%, indicating weak domestic demand.

• Gross value added increased +0.4% QoQ, led by manufacturing at +0.9%, while information and communication, real estate, and public services, education and health each rose +0.6%. Construction was nearly flat at -0.1%, and financial and insurance activities declined -0.7%.

• On a YoY basis, GDP increased +1.0%, while exports rose +3.7% and imports +2.5%. Goods exports increased +5.0%, supported by chemicals, data processing equipment, electronics and other transport equipment, while services exports declined -0.1%.

• Annual domestic demand remained mixed: machinery and equipment investment rose +1.1% YoY, but construction investment fell -1.5%. Household consumption increased only +0.1%, while government consumption rose +3.0%, creating a clear divergence between private and public spending.

• Total gross value added increased +1.1% YoY, with manufacturing also up +1.1%, marking its first annual increase since Q1 2023. Information and communication grew +3.9% and public services, education and health +2.1%, while construction value added fell -1.6%.

• Employment declined -0.5% YoY, or by 212,000 to about 45.7 million, while total labor volume also fell -0.5%. With output still growing, labor productivity increased +1.5% YoY both per hour worked and per person employed.

Key takeaways:

• Delinquency rate fell across all stages: The national delinquency rate fell 16 bps in July, with improvement seen at every delinquency stage. The rate remains 12 bps above last year but sits 46 bps below its July 2019 pre-pandemic benchmark.
• Serious delinquencies declined for a fifth straight month: Loans 90-plus days past due but not in foreclosure are trending lower but remain 87,000 above July 2019 levels.
• New default inflow has fallen annually in four of the past five months: 102,000 borrowers became 90-plus days delinquent in July, down 4% year over year. FHA loans led the decline with 13% fewer new defaults than a year ago.
• Cures rose to a nine-month high: Cures from serious (90-plus day) delinquency rose 7% to 64,100, the strongest month since October 2025. Total cures across all stages climbed 12% to 464,000, the highest since March.
• Foreclosure activity increased: Foreclosure starts hit 38,600, up 23% year over year. Active foreclosure inventory climbed 43% annually and completed foreclosure sales rose 14%, though volume remains at just 59% of pre-pandemic levels.
• Prepayment speeds slowed for a fourth consecutive month: Single-month mortality (SMM) eased 2 bps to 0.74%, the lowest reading since January, as mortgage rates remained elevated through the back half of the buying season. July's SMM remained 7 bps above year-ago levels.

ADP estimates that US private employment grew at an average pace of 11.75k in the four weeks to Aug 8th, up from 9.5k in the four weeks to Aug 1st and the strongest pace since the week of July 11th.

• The pace of growth has started to rebound after weakening through late Q2 and early Q3, though the rebound has been small so far.
• No revisions were made to previous data points.

Analysis

The US has announced an ambitious tightening of economic sanctions on countries trading with Iran in the latest step to break the stalemate and re-open the Strait of Hormuz. Steps that extend to penalties against China – the largest customer for Iranian oil – could have implications for already fragile US-China trade relations.

Tensions likewise remain high in the Red Sea following recent Houthi attacks on passing vessels. Nonetheless, MSC has now joined the list of major carriers sending ships through the southern Red Sea. These steps are sparking some optimism that we are seeing the start of a gradual return to normal levels of container traffic through the waterway.

Canada - US trade talks aimed at averting President Trump’s threat of 50% tariffs on $20B, or about 5%, of Canadian exports to the US collapsed at the last minute over the weekend. Those tariffs are now in effect, with Canada planning retaliatory tariffs for September 8th as well as support for negatively impacted Canadian businesses, implying that Canada may be preparing for a prolonged standoff.

In terms of US tariffs on other trading partners, Section 301 10% - 12.5% tariffs targeting forced labor controls have been in effect since the 10% Section 122 tariffs expired in late July. The USTR has still not released its findings for the Section 301 investigations into excess capacity practices by sixteen of the US’s largest trading partners, which could be used to restore tariffs to IEEPA levels. It took two months from the time the findings of the forced labor investigations were released until those tariffs were put in place, with a comments period and public hearings in the interim.

The concern that the White House would substantially increase tariff levels to close July may have been one factor driving the early start to peak season demand and spiking container rates back in June. That tariffs remained about level, and that the window until possibly higher tariffs remains open, may help explain the current, surprising, sustained container demand and peak rate levels on the transpacific.

Asia - US West Coast prices were level last week at about $7,500/FEU, with rates ticking up so far this week, back to the peak of $7,600/FEU reached in early July and nearly $5k/FEU higher than just before peak season demand kicked in back in late May. Prices to the East Coast, which likewise climbed $5k/FEU from late May to early July, had been steady at about the $9,000/FEU level, but have gradually climbed another $800/FEU so far this month.

In addition to resilient demand, transpacific rate behavior is also supported by some carrier capacity reductions, as well as constraints from significant congestion at several major hubs in China. The Panama Canal Authority, which recently announced cuts to daily transit slots due to anticipated drought conditions, will postpone a planned draft reduction from September to October. Several carriers have canal surcharges set for September, which could put upward pressure on rates for some Asia - US East Coast services.

Low Amazon River water levels are likewise driving disruptions and higher costs for impacted lanes in and out of Brazil. And drought conditions in the Rhine that are contributing to persistent congestion at N. Europe container hubs, together with backed up ports in the Far East, may be helping to keep Asia-Europe container rates quite elevated despite post-peak demand levels.

Prices that surged $3,000 - $3,5000/FEU from late May to early July on an early peak season start pushed rates up to more than $7,000/FEU to the Mediterranean and $5,800/FEU to N. Europe. Rates have gradually eased since then. Mediterranean prices fell 15% last week to about $5,000/FEU and N. Europe rates eased 6% to $4,700/FEU to $5k on cooling demand, but still remain 15% and 60% higher than before peak season, respectively.

Air volumes are easing as the industry enters a late summer lull. Freightos Air index data show Far East - US rates decreased 8% to $6.45/kg last week, with daily rates closer to the $6.00/kg mark and approaching July levels after climbing above $7.00/kg earlier in the month after Typhoon Dolphin disrupted operations.

Far East - Europe prices ticked up 3% to $4.58/kg, about level with late June rates despite reports of slumping e-commerce volumes following the EU de minimis cancellation July 1st. This relative rate stability suggests carriers are succeeding in effectively shifting capacity to other lanes as volumes recalibrate.