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Euro-Zone Trade Surplus Continues to Widen in December

By Jon Sindreu

LONDON–The euro zone’s trade surplus with the rest of the world widened in December for the fifth month in a row, official figures showed Monday, as a cheaper euro continued to boost exports and lower oil prices put a lid on imports.

The difference between the value of goods the euro zone sells and what it buys abroad widened to 24.3 billion euros ($ 37.4 billion) on the month, compared with EUR21.2 billion in November, according to Eurostat–the European Union’s official statistics agency.

The increase in the surplus was caused by a 2% fall in imports and a 1% rise in exports.

A weaker euro bolstered exports in the 18 countries that shared the single currency in 2014–Lithuania joined the euro zone only in January 2015–because it made their goods cheaper abroad. In 2014 overall, the trade surplus widened EUR194.8 billion compared with EUR152.3 billion in 2013, due to a 2% rise in exports and flat growth in imports, Eurostat said.

Weak imports are in part the symptom of a stagnating economy, but analysts underscore that the ultra-low price of oil in the international markets also played a part in reducing import values.

“While the drop in imports could suggest that euro-zone domestic demand remains limited, it is evident that euro-zone import values are being limited appreciably by lower oil and commodity prices,” said Howard Archer, economist at IHS Global Insight.

Positive net trade is a boon for the fragile euro zone, because it means European companies can find buyers abroad to offset the weakness of their own domestic economies. Latest official data showed the economy of the single-currency area expanded 0.3% on the final quarter of 2014, an upbeat figure after a disappointing third quarter–due in part to trade being weaker than expected during the summer.

However, imbalances within the euro zone itself remain stubbornly large: Germany, the Netherlands and Italy continue to register the largest surpluses, while France, Spain and Greece continue to suffer from a trade deficit.

Exporters have strongly benefited from a cheaper euro. The single currency has been falling steadily against the dollar since May, as positive growth and employment figures in the U.S. have driven markets to expect the Federal Reserve will raise interest rates sooner than the European Central Bank.

In fact, fears of deflation in the euro zone led ECB President Mario Draghi to announce a program of large-scale government bond purchases in January–a policy known as Quantitative Easing or QE. The expectation of these sovereign bonds going up in value has lowered the yields they provide, which has driven investors off such assets and further weakened the exchange rate.

Write to Jon Sindreu at [email protected]

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