18 November 2013

Eurozone trade picture remains weak despite surplus widening in September

The eurozone's peripheral members most affected by the crisis continued to bolster their economies in September, as shown by their trade balances. Overall, the eurozone trade surplus doubled, led by strong figures from Germany.

As reported by the Financial Times (subscription required) and the FAZ, the eurozone’s trade surplus with the rest of the world was better than expected in September, at €13.1 billion compared with €8.6 billion in September last year, as peripheral states continued to put their competitiveness on a sounder footing.

Imports were flat and exports rose 3 per cent year-on-year. The cumulative surplus of the eurozone for the first nine months of 2013 more than doubled: €109.6 billion, compared with €50.2 billion in the same period of 2012.

Germany, at €127.8 billion, continued to have the largest surplus from January to August, even though the country’s exports fell 1 per cent and imports by 2 per cent on the previous year.

The EU Observer reports that the statistics come just days after the European Commission warned Germany that it would investigate whether its trade surplus, which is worth around 7 per cent of GDP, was hurting other eurozone economies. Der Standard added critics complained that the German surpluses were only possible because customers have debt in other countries to buy German goods and services. They see it as one of the causes of the debt crisis in Europe.

EU Observer further reports that the eurozone's surplus with the United States remained almost unchanged at €47.6 billion, while its balance with Japan has shifted from a €4.2 billion deficit in 2012 to a €500 million surplus. China and Russia are the only major economies from whom the eurozone imports more than it sells.

Apart from Germany, the Netherlands were the strongest performers racking up a surplus of €36 billion, although they also saw their export levels fall 2 per cent. Meanwhile, embattled France, which has been repeatedly warned by the European Commission to take further steps to liberalise its labour market, saw a 2 per cent fall in its export levels and a trade deficit of €50.1 billion. Outside the eurozone-17, the UK has run the largest deficit at €44.5 billion so far in 2013.

However, the eurozone's crisis-countries are among the strongest performers, suggesting that their economies are rebalancing. Spain, which will exit its €41 billion bank rescue package in January, has the fastest growing exports sector in the EU, with total exports valued at €157.9 billion, up on €150.5 billion in 2012. At the same time, the country's imports have fallen from €174.5 billion to €166.9 billion, meaning that Spain is likely to export more than it consumes in 2014 for the first time since the 1970s. Greece, Portugal and Cyprus are also among the handful of other European economies to see rising exports combined with falling imports. Italy bucks the trend, with its €19.3 billion surplus almost entirely the result of a 7 percent cut in consumption.

City AM writes that despite the improved performance in September, Capital Economics agree that net trade most likely had a negative effect on GDP, contributing to the rate of growth slowing to just 0.1 per cent quarter-on-quarter, from 0.3 per cent in the second quarter. Seasonally-adjusted data show that eurozone exports of traded goods fell by 0.4 per cent quarter-on-quarter while imports edged up by 0.3 per cent quarter-on-quarter.

"The eurozone could really do with some help from improving global growth over the coming months that lifts eurozone exports and supports business confidence", commented IHS Global Insight's Howard Archer, following the third-quarter slowdown in GDP. "Eurozone exporters would undoubtedly also like to see the euro retreat further from the 23-month high of $1.38 that it hit in October: it is currently still relatively elevated at $1.35."

---

EU Energy Commissioner Günther Oettinger said he considered it "unthinkable" that Germany could be fined by the European Commission for its excessive current account surplus, writes the Wirtschaftsblatt.

Separately, economic columnist Yves de Kerdrel writes in the print edition of Le Figaro: "The logic – if one can use this word when referring to Brussels technocrats – behind this attack on Germany is that, by exporting ever more…our neighbours harm other European countries, which find themselves deprived of export markets… As if Berlin were harming Greece by exporting olive oil to China!" He concludes that the European Commission’s review of Germany’s trade surplus "shows that the Brussels technocracy has no difficulties in shifting from cynicism to demagogy".

See also: Balance of trade adjustment in the euro area - what are the main drivers? © Bruegel