UPDATE: Euro-Zone Jun Trade Balance Weaker Than Expected

 
   (Adds economist comment, additional details.) 
 
   By Emma Charlton 
   Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--The euro zone recorded a foreign trade deficit in June, defying market expectations for a surplus as import growth outstripped the increase in exports.

The 15 countries that share the euro recorded a trade deficit of EUR0.1 billion with the rest of the world in June, after registering a EUR7.5 billion surplus in the year-earlier month, Eurostat data showed Monday.

In May the deficit was EUR3.9 billion, and economists had expected it to bounce back to a surplus of EUR1.1 billion on the back of strong exports in June.

Monday's weaker-than-expected data suggests that the strength of the euro and weakening global demand are hitting the currency bloc's exporters, making their products comparatively more expensive.

"The euro zone's export performance is likely to deteriorate over the near term," said Martin van Vliet, an economist at ING Bank. "The adverse impact of past euro appreciation has not been fully felt and the U.S.-led slowdown in global demand appears to be deepening. The upshot is that the euro has depreciated noticeably in recent weeks, also in trade-weighted terms. If sustained, this would make euro-zone exports more competitive again and could provide some relief to exports further out," he said.

Monday's data showed that imports grew at twice the rate of exports in June 2008 compared with June 2007.

The data showed that imports rose 11% to EUR135.6 billion in June 2008 from EUR121.7 billion in the year-earlier month. Exports increased 5% to EUR135.5 billion from EUR129.2 billion over the same period.

Trade between the euro-zone members increased 2% in June 2008 compared with June 2007.

Over the five months to May, the euro-zone's trade surpluses with the U.K. and the U.S. both narrowed, while the trade deficit with China remained roughly stable at EUR42.0 billion.

The biggest change came in the trade deficit with Russia, which widened 25% to EUR17.4 billion in the five months to May 2008 from EUR13.9 billion a year earlier. That's most likely due to the rising cost of energy imports from Russia to the currency bloc.

The value of total exports to the U.S. fell 4%, while exports to Japan dropped 1% in the January-May period compared a year earlier.

Eurostat hasn't provided cumulative data for June yet.

-By Emma Charlton, Dow Jones Newswires; +44 20 7842 9307; emma.charlton@dowjones.com

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(END) Dow Jones Newswires

August 18, 2008 05:49 ET (09:49 GMT)


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