The Europeans have joined the march to stronger trade numbers, in the latest hopeful signal that the fragile global recovery is taking root. But the overall picture is not as bright as it seems and a rising euro could soon darken it further.
The 16 nations that use the euro recorded a surprisingly strong trade surplus in September thanks to sharply higher exports. The euro zone surplus of €3.7-billion ($5.78-billion) far outstripped the analysts' consensus forecast of a €2-billion deficit.
The latest numbers join better-than-expected export gains in Canada, healthier Asian shipments and rising imports in the United States - all pointing to a global recovery in demand.
For the euro zone, it was the best month for exports since a 6.8-per-cent jump in January, 2008, and a vital turnaround for a region that depends on exports for 40 per cent or more of its economy and still faces weak domestic demand.
But the 5.5-per-cent, month-on-month increase, seasonally adjusted, has to be put in perspective, analysts said.
"You've got to bear in mind how much exports fell" when trade collapsed late last year and into the early part of this year, said Howard Archer, chief European economist with IHS Global Insight in London.
Including the September gains, euro zone exports in the first nine months of 2009 were still down about 22 per cent from a year earlier. And imports also remain depressed - up 1.1 per cent, seasonally adjusted, from the previous month, but down 24.5 per cent in September from a year earlier. This indicates that although domestic demand is at least stabilizing, the recovery from recession is far from robust.
"Like Canada, euro zone exports are getting an initial lift as we move from the darkness to the light in terms of global trade activity," said Avery Shenfeld, chief economist at CIBC World Markets. "But they may find the follow-through is not particularly healthy, because of the impact of the strong currency on their competitiveness."
The strong euro, weak U.S. dollar and undervalued Chinese yuan are the focus of considerable concern among European policy makers.
EU officials have been pleading with both Washington and Beijing to let their currencies appreciate, in an effort to take the heat off the blindsided euro.
"The euro upward of $1.50 [U.S.] is not good news," Mr. Archer said.
It means U.S. exports will be more attractive compared with European products in the developing world, where the main growth markets now lie. And because the Chinese currency is effectively pegged to the greenback, it makes the Europeans less competitive in the most important of all the growing markets.
A high-level European delegation, including European Central Bank president Jean-Claude Trichet, is heading to Beijing next week to make its case for a stronger yuan.
If the euro gets no relief, the improving euro zone trade picture could quickly deteriorate, said Marko Papic, Eurasia analyst with Stratfor, a global intelligence company based in Austin, Tex.
"It's just really a one-off figure of confidence that may not last," Mr. Papic said, referring to the September trade rebound.
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Euro zone exports: Far from robust
In billions of euros / Growth
Jan.-Aug. '08
Britain / -25%
U.S. / -21
Canada / -2
Switzerland / -11
Russia / -40
Poland / -25
Czech Republic / -25
Sweden / -29
Japan / -18
Turkey / -28
THE GLOBE AND MAIL / SOURCE: EUROSTAT
© The Globe and Mail
