LONDON--Exports from the 17 countries that share the euro slumped in May, as did imports, an indication that the currency area's longest postwar contraction may have continued into a seventh straight quarter.
The European Union's statistics agency said Tuesday that adjusted for seasonal factors, exports from the euro zone to the rest of the world fell 2.3% from April, while imports were down 2.2%. It was the second straight month in which exports fell sharply, and the largest month-to-month fall since June 2011.
With rising unemployment, low wage growth and government cutbacks damping domestic demand, rising exports are essential if the euro zone is to return to growth. But with growth in many other parts of the global economy faltering, a significant pickup in overseas sales appears unlikely in the months ahead.
The euro-zone economy shrank in the first quarter of the year as exports declined. Eurostat won't release its first estimate of gross domestic product in the three months to June until mid-August, but business surveys and economic data releases suggest output fell again.
The International Monetary Fund last week said it expects the currency union's economy to contract this year by 0.6% before a 0.9% rebound next year. It also urged the European Central Bank to cut policy rates and use other tools to spur lending.
Eurostat said before seasonal adjustments, the euro zone had a trade surplus of EUR15.2 billion in May, up from EUR6.6 billion in May 2012, and EUR14.1 billion in April.
The widening of the trade balance over the year was entirely because of a 6% drop in imports, a sign of weak domestic demand. On a seasonally-adjusted basis, the trade surplus fell to EUR14.6 billion from EUR15.2 billion in April. The drop in exports to countries outside the European Union was particularly sharp in Germany, falling by 9% from April.
By contrast, Italian exports to non-EU countries rose by 3.6%, while Spanish exports rose by 0.8%. The largest decline was in Cyprus, where exports outside the EU fell by 10.6% over the month, a sign that the crisis in the banking system is hitting the rest of the economy hard.
There is some evidence that the imbalances that contributed to the currency area's fiscal and banking crisis are being corrected. In the first four months of the year, Italy had a trade surplus of EUR4.7 billion, compared with a deficit of EUR4.2 billion in the same period of 2012.
Likewise, Spain's deficit fell to EUR5.7 billion from EUR14.5 billion in the first four months of last year. Trade deficits have also narrowed in Greece and Portugal, although not to the same degree. Eurostat also said that the annual rate of inflation in the currency area picked up to 1.6% in June from 1.4% in May, in line with its preliminary estimate and economists' expectations.
The annual rate remains below the ECB's target of just under 2%, and that gives policy makers room to take further steps to stimulate the moribund economy.
"We think there is every chance that the ECB will eventually take its key policy rate down from 0.5% to 0.25% as we anticipate that the euro zone will continue to find it very tough to develop clear growth," said Howard Archer, an economist at IHS Global Insight.
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The European Union's statistics agency said Tuesday that adjusted for seasonal factors, exports from the euro zone to the rest of the world fell 2.3% from April, while imports were down 2.2%. It was the second straight month in which exports fell sharply, and the largest month-to-month fall since June 2011.
With rising unemployment, low wage growth and government cutbacks damping domestic demand, rising exports are essential if the euro zone is to return to growth. But with growth in many other parts of the global economy faltering, a significant pickup in overseas sales appears unlikely in the months ahead.
The euro-zone economy shrank in the first quarter of the year as exports declined. Eurostat won't release its first estimate of gross domestic product in the three months to June until mid-August, but business surveys and economic data releases suggest output fell again.
The International Monetary Fund last week said it expects the currency union's economy to contract this year by 0.6% before a 0.9% rebound next year. It also urged the European Central Bank to cut policy rates and use other tools to spur lending.
Eurostat said before seasonal adjustments, the euro zone had a trade surplus of EUR15.2 billion in May, up from EUR6.6 billion in May 2012, and EUR14.1 billion in April.
The widening of the trade balance over the year was entirely because of a 6% drop in imports, a sign of weak domestic demand. On a seasonally-adjusted basis, the trade surplus fell to EUR14.6 billion from EUR15.2 billion in April. The drop in exports to countries outside the European Union was particularly sharp in Germany, falling by 9% from April.
By contrast, Italian exports to non-EU countries rose by 3.6%, while Spanish exports rose by 0.8%. The largest decline was in Cyprus, where exports outside the EU fell by 10.6% over the month, a sign that the crisis in the banking system is hitting the rest of the economy hard.
There is some evidence that the imbalances that contributed to the currency area's fiscal and banking crisis are being corrected. In the first four months of the year, Italy had a trade surplus of EUR4.7 billion, compared with a deficit of EUR4.2 billion in the same period of 2012.
Likewise, Spain's deficit fell to EUR5.7 billion from EUR14.5 billion in the first four months of last year. Trade deficits have also narrowed in Greece and Portugal, although not to the same degree. Eurostat also said that the annual rate of inflation in the currency area picked up to 1.6% in June from 1.4% in May, in line with its preliminary estimate and economists' expectations.
The annual rate remains below the ECB's target of just under 2%, and that gives policy makers room to take further steps to stimulate the moribund economy.
"We think there is every chance that the ECB will eventually take its key policy rate down from 0.5% to 0.25% as we anticipate that the euro zone will continue to find it very tough to develop clear growth," said Howard Archer, an economist at IHS Global Insight.
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