EMU Trade Surplus Rises

The EMU trade surplus rose in September to €13.5b from €10.8b in August. However, the average surplus size has been shrinking as the 12-month average is €14.9b, the 6-Mo average is €13.9b, and the 3-Mo average is €12.4bl. The September surplus has risen above its 3-month average but does not seem to be part of a trend.

The table chronicles the gradual erosion in the trade surplus on manufacturing trade from 12-mo to 6-mo to 3-mo. On the same timeline the deficits on non-manufacturing trade in EMU has become only slightly smaller partly offsetting the effect of the shrinking manufacturing surpluses on the overall trade picture.

Export trade trends for total trade as well as for Manufacturing and nonmanufacturing viewed separately show no clear trend on the 12-Mo to 6-Mo to 3-Mo timeline.

Import trends show overall acceleration that is supported by both accelerating manufacturing imports and non-manufacturing imports.

The Euro-Area trade data are for net flows in and out of the whole area with intra-regional trade netted out. The EMU area is showing an acceleration in imports that suggests a strengthening in demand. However, the area’s exports are not picking up in step. These trends are not borne out in the month-to-month changes but are fully reflected in the sequential averages.

However, it is too soon to view Europe as in recovery or out of the woods based on some strength in imports. While the sequence of import growth rates improves steadily over shorter periods, the more reliable year-on-year rate of growth for imports still register declines for overall imports driven by more extreme weakness in non-manufacturing imports.

While exports are not trending to stronger growth, at least export flows appear to be stable with positive growth rates for the most part. Manufacturing exports gain 1.2% over 12-months and rise at a 0.8% annual rate over three-months. The nominal growth is slow and is indicating only slow decay in real terms.

Country level data are, of course, of a very different quality, since these data are by the reporting country and will include as ‘exports’ goods sent anywhere outside that country’s borders which will include exports within the Euro-Area itself. On this basis German exports and imports are declining and decelerating. France shows exports steadily accelerating with imports not trending but clearly declining on all horizons. The UK, a non-EMU/NonEU country, shows exports reviving from a steep negative 12-month growth rate to show strong gains over three months. Meanwhile, UK imports also recover from steep year-on-year declines to post a more neutral result over three-months. On the export side alone Finland shows exports growing on all horizons while Portugal and Belgium show export growth turning negative over shorter horizons.

On balance, EMU and European trends are mixed. There is some hint of stabilization on the import side, but that trend development is new and not echoed by year-over-year strength. Germany and France, the two largest EMU economies, both show consistently weak imports. There is precious little good news in the September trade report from EMU.