The eurozone’s trade surplus narrowed sharply in October as exports fell, a rare piece of bad news for an economy that has grown more rapidly than expected this year.
Adjusted for seasonal patterns, eurozone exports fell by 2.4% in from September, while imports were up 0.6%, the European Union’s statistics agency said Friday.
As a result, exports of goods exceeded imports by 19 billion euros ($22.44 billion), down from the EUR24.5 billion surplus recorded in September.
Trade flows can be volatile from month to month, even with seasonal adjustments. But the narrowing surplus could be a sign that the euro’s gains against other major currencies this year are pricing its goods out of some overseas markets.
However, other indicators suggest eurozone exporters remain highly competitive, and the October dip may be transitory. A survey of 3,000 manufacturing companies across the currency area that was released Thursday found that activity was at its highest in December since the series began in 1997, buoyed in part by a strong increase in export orders.
The trade figures come a day after European Central Bank President Mario Draghi hailed an improved outlook for eurozone growth. The central bank Thursday said it expects the economy to grow by 2.4% this year, which would be its strongest performance since 2007. It also raised its growth forecast for next year to 2.3% from 1.8%.
“The incoming information, including our new staff projections, indicates a strong pace of economic expansion and a significant improvement in the growth outlook,” Mr. Draghi said in a news conference.
If the fall in exports is due to the euro’s exchange rate, that headwind may ease in 2018. The U.S. Federal Reserve Wednesday raised short-term interest rates for the third time this year, and signaled it would stay on a similar path next year. With the ECB unlikely to raise its key interest rate until late 2019, that growing divergence could cause the euro to weaken against the U.S. dollar.
Without seasonal adjustment, the eurozone’s trade surplus stood at EUR18.9 billion in October, down from EUR19.2 billion in the same month last year.
Source: Dow Jones