Haver Analytics
Haver Analytics
| Mar 18 2024

EMU Trade Surplus Grows; ports Struggle as Imports Contract

The January trade balance in the euro area surged sharply into a stronger surplus at €28.0 billion, up from €14.3 billion in December, doubling in one months’ time. The 12-month average for the trade balance is a surplus of €8.3 billion. The average over the previous three months is €19.3 billion.

A larger surplus; a smaller deficit The improvement comes about in January through two sources: one is the balance on manufacturing trade where the surplus rose to €47.75 billion from €37.8 billion in December. The average surplus over the last 12 months is €34.2 billion. The second source of improvement is the balance on nonmanufactured goods, a trade balance that is in deficit. That deficit got smaller in January at -€19.7 billion as it improved from -€23.5 billion in December. Over 12 months the average deficit on nonmanufacturing trade is -€25.9 billion. Month-to-month there's improvement on both the manufacturing and the nonmanufacturing balance of the €14 billion improvement, about €10 billion of it comes on the manufacturing side with the rest on the nonmanufacturing side. That occurs with the manufacturing surplus getting larger and the balance on nonmanufacturing goods showing a smaller deficit.

The story of trade improvement is told by clearly different trends for exports and for imports. If we divide exports and imports into manufactured and nonmanufactured goods (as we did in the description above), we do see some quite different growth rates; however, in both cases the trends work to produce an improved trade balance for the euro area.

Trade in Manufactures Manufactured goods show exports fluctuating around a slight increase or little-change, falling by 1.2% over 12 months, rising slightly over six months, then falling at a 2.1% annual rate over three- months. Compare this to manufacturing imports where imports fall 13.8% over 12 months, fall at a 20.1% annual rate over six months, and then fall at a 27% annual rate over three months. While exports are floundering and holding around the zero-growth mark, imports are clearly plunging on all horizons with the import growth rates getting weaker over more recent periods. These trends obviously lead to an improved trade performance as the trade balance moves into larger surplus on more or less unchanged manufacturing exports amid plunging manufacturing imports.

Trade in Nonmanufactures Turning to nonmanufacturing trade on the export side, we see exports growing and accelerating over the different horizons, from 4.4% over 12 months, to a gain at a 33% annual rate over six months, to an increase at a 53% annual rate over three months. Nonmanufacturing imports, on the other hand, show persistent declines, however, amid withering weakness. Nonmanufacturing imports fall by 23.9% over 12 months; that's reduced to a decline of only 0.3% at an annual rate over six months, although it rebounds to a decline of 12.2% annualized over three months. Nonmanufacturing imports are declining on all horizons as the tendency for decline diminishes over more recent periods; however, this effect is being swamped by exports where the exports of nonmanufacturing goods are growing and are growing more strongly over shorter periods.

The two largest EMU Nations Looking at the two largest economies in the European Monetary Union, we see German exports growing over 12 months, six months, and three months and growing stronger over those horizons. The same trend is true of French exports which grow on all horizons and grow stronger as well. German imports contract over all horizons and French imports contract over all horizons. We see reinforcing trends in both Germany and in France behind the overall Monetary Union trends.

The U.K. The U.K., a European economy that's not a member of the monetary union or the European Community, shows exports and imports both declining over 12 months and over six months, with both trade flows improving over three months and with exports being slightly stronger over three months.

Other EMU Exports Export trends for Finland, Portugal, and Belgium - all of them monetary union members - show different patterns. For Belgium, exports decline on all horizons and are weaker over three months than over 12 months. For Portugal, exports decline over 12 months but gain pace and rise over six months and over three months. In Finland, there are double-digit declines in exports over 12 months and six months, and roughly unchanged performance over three months.

Learning from EMU trade trends The export picture for the monetary union does not give us very much reason to be hopeful that demand is picking up since community members export to one another with great frequency. Individual country exports are picked up by their domestic trade data and show little boost for the EMU members in the table. However, when we look at the exports of the monetary union, trade within the community is excluded (as intra-regional) and community wide exports are only about trade with countries outside of the monetary union. On at basis, exports show the external demand in the global economy as being listless as EMU exports are not doing very much, judging from manufactured exports out of the European monetary union. However, European Monetary Union nonmanufactured exports are doing quite well and have been accelerating. The imports of the monetary union, whether for manufactured or nonmanufactured goods tell a story of continuing weak demand in the EMU. Both manufacturing and nonmanufacturing imports are declining on all horizons.

The trade statistics can be used to tell us something about an area's competitiveness and on this basis, because its trade picture is improving, European competitiveness would seem to be in reasonably good shape. However, it's also based on differences in growth rates and because of the vast difference in the growth rate of exports and imports it would seem that weakness within the monetary union is having a huge impact on improving the trade picture, while exports are mostly contributing to trade improvement by floundering rather than by growing strongly. Through the fourth quarter, the current account surplus in the EMU relative to GDP continues to grow. The international trade in goods and services continues to provide a boost to GDP growth for the European Monetary Union.

  • Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media.   Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

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