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Euro area net trade stimulated growth in Q4

Euro area domestic demand growth momentum is arguably the most robust since the turn of the millennium, but euro area manufacturers have also been well-placed to exploit increasing external demand, noted Daiwa Capital Markets Research.

The value of euro area goods exports has been on a steep upward movement for over a year, and the latest figures indicated another solid rise, of 3.4 percent sequentially in November, to more than EUR 187 billion, 6.8 percent year-on-year higher than a year ago. Increased demand from the major emerging economies appears to have given a considerable boost, with exports to Turkey, China, Russia and India all seeing double-digit percentage annual rises, while exports to other major advanced economies showed company, but not-as-impressive results.

Delving into the details, consumer goods exports appear to have been the most successful category in recent quarters, with capital goods exports also maintaining an upward trend against the backdrop of the global capital expenditure recovery. In the meantime, imports also rose 6.8 percent, leaving the trade surplus at EUR 22.5 billion. However, looking at the trend over recent month, the picture is slightly more nuanced.

Imports have decelerated after rising particularly rapidly in the first half of 2017. It rose on a three-month basis in November by only 1.6 percent, less than half the rate of exports, implying that net trade in the fourth quarter is on track to make a larger contribution to GDP growth in the fourth quarter, having contributed 0.1 percentage point in the third quarter.

“Looking ahead, the current appreciation trend of the euro represents a downside risk - the nominal trade-weighted index is currently at its highest level since April 2014 and respectively almost 3 percent and 6 percent above its one-year and three-year averages”, stated Daiwa Capital Markets Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bullish 105.753, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -97.769. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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