CHART OF THE WEEK
April’s trade surplus reached a record high of 28 billion euros due to a sharp +4.9% rebound in exports. This week’s graph shows that from 1999 until 2011 the Eurozone’s balance of trade with the rest of the world was relatively stable. At the end of 2011, it was close to Eurozone creation levels. Since then, the trade surplus has grown continuously and currently stands at about 2.5% of GDP.
This period of rising trade surplus can be broken down into two separate phases:
- Phase 1 from late 2011 to mid-2013: the Eurozone crisis resulted in shrinking domestic demand and lower imports, while exports grew regularly;
- Phase 2 from mid-2013 to present: exports continued upwards before pulling back, while import volumes sharply rebounded. However, the impact of rising volumes has been offset by a significant fall in import prices.
OUR ANALYSIS
These underlying developments explain why foreign trade has dragged somewhat on GDP growth since mid-2013 despite the nominal trade surplus figures going from strength to strength.
As Eurozone domestic demand is likely to remain healthy, import growth volumes should also remain strong. However, with oil prices recovering, import prices are unlikely to fall further.
The trade surplus should therefore gradually tail off, unless exports pick up again.
The opinion expressed above is dated June 17th, 2016 and is liable to change.
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