Eurozone trade balance hits 4bn-euro deficit

[Naveed Yaseen]

BRUSSELS: The eurozone trade balance with the rest of the world collapsed to a 4-billion-euro ($6bn) deficit in August from a record July surplus, official data showed on Friday.

The 16 countries using the single euro currency had a 12.3-billion-euro surplus on strong exports and flat imports in July, and August deficit ended a five-month run of trade surpluses.

While those surpluses were attributed by analysts to an increase in global purchasing power rather than to a richer and more confident Europe, the effects of a dollar currently at a 14-month low on currency markets have yet to be fed into the results.

The data, therefore, represents a substantial knock to confidence after massive improvement during the eurozone’s climb out of the economic mire over the second and third quarters of this year.

The euro is approaching 1.50 dollars and EU policymakers are concerned at the effect an idle US administration could have on exports from the bloc, in particular within its leading economy, Germany.

Some analysts say US authorities, despite repeated proclamations in favour of a ‘strong dollar’, are happy to see the US currency weaken, which gives a welcome advantage to US exports.

European Central Bank President Jean-Claude Trichet has also warned that “the euro was not created to be a global reserve currency” among a series of pointed remarks on an issue rising up the political agenda.

“Eurozone exporters ... will be fervently hoping that the euro eases back,” said analyst Howard Archer of IHS Global Insight.

The August trade balance for the 27-nation European Union as a whole, including Britain, also saw a massive retreat to a deficit of 12.1 billion euros after a revised 0.6-billion-euro surplus in July.

However, that was better than the 28.7-billion-euro deficit recorded one year earlier, according to the figures released by the EU’s Eurostat office.

Seasonally-adjusted exports from the eurozone fell in August compared to the previous month by 5.8 per cent and imports by 1.3 per cent. Across the full bloc, exports dropped by 4.2 per cent and imports by 1.4 per cent.

“Trade data can be very volatile from month to month, so not too much importance should be covered to one month’s data,” Archer stressed. “Nevertheless, it is worrying for eurozone recovery prospects to see that seasonally-adjusted exports plunged by as much as 5.8 per cent month-on-month in August, which more than wiped out the gains of the previous two months.”

He added that seasonally-adjusted eurozone imports falling by 1.3 per cent in August “hardly points to marked improvement in domestic demand.”

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