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Economy in Brief

EMU-16 Trade Flows and Balance
by Robert Brusca  February 15, 2019

EMU-wide exports ticked lower in December as imports were flat. That combination reduced the trade surplus slightly. Still the surplus in December at €15.6b is now far from its 12-month average of €16.2b but is significantly lower than its 12-month ago surplus of €22.4b (not shown).

Some different and interesting patterns emerge looking at manufacturing and nonmanufacturing trends separately. For trade in manufactures, exports decline over 3-months, 6-months and 12-months. Imports gain over 12-months and six months, then fall sharply over three-months. Judging from imports German domestic demand looks weak. The year-on-year import rise is less than 1% while the annualized 3-month drop is at a pace of -5.5%.

For non-manufactures exports and imports, growth rates are nearly identical over 12-months. But export flows are ramping up while import flows are slowing. Exports of non-manufactures are up at a 41.5% pace over three months annualized compared to 3.5% for non-manufactured imports. The cross trends for non-manufactures are hard to reconcile with the other trends. In particular the growing strength of non-manufactured exports is hard to explain.

The table also shows export trends for a number of EMU and EU members. For the most part exports are moderate to weak. Portugal is the only exception. Apart from Portugal, the strongest year-on-year rise in exports is the 3.7% gain for Finland; remember that these are nominal flows.

International flows are slowing and China is slowing. China’s Consumer inflation gauge went to a pace of 1.7%. In related data today US export and import price were weak with US nonpetroleum imports showing not just weakness but price declines. These declines can’t be signaling much strength in economic conditions abroad generally because prices are so weak.

The US trade negotiating deadline with China is coming up with March 1 as the final day to cut a deal and get in under the wire. But the President, only recently, has been sounding flexible about the date. All of a sudden he has been saying that talks are going well and that the deadline is not fixed. Meanwhile others seem to report that the two sides are still miles apart. It will take time to tell and we may only really know the facts when the deadline draws nearer or has to be extended or alternatively if tariffs are imposed.

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