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Economy in Brief

EMU Trade Deficit Emerges
by Robert Brusca February 15, 2008

EMU import growth is slowing but export growth is slowing faster. As a result EMU has developed its first trade deficit in 16 months. Germany and Finland the two EMU countries with the lowest inflation rates in the last 10 years continue to post surpluses. As the lowest inflation countries in this common currency area they are more price competitive than other EMU nations.

On a seasonally adjusted basis, eight of the 13 countries belonging to the euro area in December registered a trade deficit, led by sizeable deficits in The Netherlands (-E8.0 billion) and Spain (-E5.0 billion). Among the larger EMU countries, Italy (-E2.4 billion) and France (-E0.6 billion) posted deficits. Red ink was also chalked up on the trade account by were also posted by Belgium (-E1.8 billion) and Greece (-E1.5 billion).

The EMU surplus with the US is now shrinking slightly and is abut E8bln lower than it was a year ago. Exports to the US are down Yr/Yr and imports are up. It is looking like the weak dollar/strong euro are having an impact.

Like the US, EMU has a huge deficit with China that rose to E101bln last year from E82.6bln in 2006, as imports from China’s spurted by 18%. This is also a reminder that while corporations continue to be very up beat on China growth, if the US and Europe slowdown China’s exports and growth overall will slow as well. China may have a slug of domestic infrastructure building in progress, but it remains highly dependent on trade.

Euro Area: 13-Trade trends for goods
  m/m% % Saar
  Dec-07 Nov-07 3-Mo 6-Mo 12-Mo 12-Mo Ago
Balance* €€ (2,105) €€ 1,965 €€ 703 €€ 1,603 €€ 2,550 €€ (685)
All Exports -2.5% -0.7% -8.3% -3.2% 1.0% 11.2%
Food and Drinks -1.8% 0.6% 0.3% 7.1% 5.1% 12.0%
Raw Materials -1.7% -2.1% -11.7% -9.7% 1.7% 13.9%
Other -2.6% -0.8% -8.8% -3.6% 0.7% 11.0%
MFG -4.2% -0.4% -17.1% -7.1% -2.3% 11.3%
All Imports 0.7% -0.5% 9.2% 8.2% 5.2% 7.0%
Food and Drinks -4.2% -2.2% -27.1% 8.6% 9.0% 5.2%
Raw Materials -0.3% -2.1% -4.9% -4.9% -1.8% 23.6%
Other 1.0% -0.3% 12.8% 8.9% 5.4% 6.3%
MFG -2.4% -2.7% -20.9% -9.2% -4.2% 9.9%
*Eur mlns; mo or period average
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