Euro zone Dec. trade gap points to weakening demand

By: | at 07:00 PM | International Trade  

The euro zone had a much smaller than expected trade gap in December as imports shrank more quickly than exports, data showed, pointing to falling domestic demand as the euro area sinks deeper into recession.

The European Union’s statistics office, Eurostat, said the unadjusted trade deficit in the 15 countries using the euro in December was 700 million euros against a 3.9 billion gap the year before and market expectations of a seven billion shortfall.

Year-on-year imports fell five percent in December while exports shrank two percent, Eurostat said.

“Exports and imports are slowing very sharply, and it’s consistent with ... demand from import and export markets plunging,” said Martin van Vliet, economist at ING.

“I’d expected the trade balance to widen a bit, but the dramatic import figure suggests that aggregate demands in the euro zone is very weak, and that’s not a positive sign at all. The euro zone is in a deep recession,” he said.

For the whole 2008, the single currency area had a trade gap of 32.1 billion euros against a surplus of 15.8 billion in 2007. “Looking ahead, I think things are set to go from bad to worse, given that the surveys of export orders just point to absolutely huge falls in annual export growths over the coming months,” said Ben May, economist at Capital Economics.

“It looks very likely that exports will be a sharp drag on the economy this year,” he said.

Seasonally adjusted, the December trade deficit was 300 million euros against a four billion gap in November as imports fell 3.9 percent month-on-month and exports fell 0.9%.

Detailed data for December was not yet available, but figures for the January-November period showed the biggest driving force behind the deficit was still the shortfall in energy trade which widened to 286 billion euros from 210.9 billion in the 11 months of 2007.

“At least though, the sharp retreat in oil prices from a record high of $147 per barrel in July to recently trade under $40 per barrel will help the euro zone’s trade balance,” said Howard Archer, economist at IHS Global Insight.

The euro zone’s trade deficit with energy exporter Russia widened in January-November to 34.3 billion euros from 26.9 billion a year earlier. (Reuters)


Be the first to comment on this article!

To avoid Spammers, we ask that you log in using your account. Free accounts have access to commenting.

Did you forget your password?

It happens...