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Euro-area exports rose for a second month in June, driven by a surge in shipments from Germany, as companies tapped into emerging markets to offset declining demand at home.
Exports from the 17-nation currency bloc advanced a seasonally adjusted 2.4 percent from May, when they gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Imports stagnated in the period and the trade surplus widened to 10.5 billion euros ($13 billion) from 6.8 billion euros.
Europe’s economy contracted 0.2 percent in the second quarter as tougher austerity measures pushed at least six member states including Italy and Spain into recession. With households and companies across the region cutting spending, exporters such as L’Oreal SA, the world’s largest cosmetics maker, have relied on faster-growing Asian markets to bolster sales.
“The euro-region economy is undergoing a mild recession,” said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. “The global growth dynamic has eased somewhat, but exports will continue to support development to a certain extent in the second half of the year.”
German exports jumped 6.6 percent in June to 40.9 billion euros, while imports in Europe’s largest economy rose 1.5 percent. Shipments from Italy increased 2 percent in the period. France and Spain reported gains of 1 percent and 1.4 percent, respectively.
Exports to U.S.
The euro economy may shrink 0.2 in the third quarter before returning to growth in the final three months of the year, according to the median forecast in a Bloomberg News survey of 20 economists. The euro has depreciated about 2.7 percent against the dollar in the past three months as the region’s turmoil worsened, making exports cheaper. The single currency extended gains after today’s data were released and traded at $1.2371.
Exports to the U.S. rose a non-seasonally adjusted 11 percent in the first five months from a year earlier, while shipments to the U.K. increased 7 percent, today’s report showed. Exports to China and Russia surged 8 percent and 16 percent, respectively, while Japan shipments climbed 13 percent. Detailed trade data are published with a one-month lag.
L’Oreal, based in Paris, reported on July 26 that second-quarter sales beat analysts’ estimates, helped by demand in Asia, Africa and the Middle East. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, is extending its global reach by expanding capacity in the U.S. and China.
China’s Slowdown
More than a decade after a financial crisis rocked Asia, the trend growth rates of Indonesia and its neighbors are rising as governments boost spending and companies invest to tap younger workforces. Southeast Asia is proving resilient to Europe’s debt crisis and China’s slowdown, with Philippine and Malaysian expansion surpassing estimates and Thai growth forecast to accelerate.
Indonesia’s government will increase capital spending by 15 percent next year, joining Southeast Asian nations that are upgrading infrastructure to woo investment. Outlays will rise to 193.8 trillion rupiah ($20 billion) in 2013, President Susilo Bambang Yudhoyono said in Jakarta yesterday.
In the U.S., a jobless rate that has topped 8 percent for 42 months is masking the biggest pickup in worker pay in more than five years. July retail sales that exceeded estimates indicate consumers may be starting to spend more of that money.
‘High Government Debt’
The BGOV Barometer shows inflation-adjusted employee compensation grew at a 4.4 percent annual pace from January through June, the biggest six-month gain since March 2007, according to Commerce Department figures. The Barometer also shows retail sales last month rose a surprising 0.8 percent, the largest advance since February and the first in four months.
Still, “global economic conditions might deteriorate in the face of the euro crisis and high government debt,” BMW Chief Executive Officer Norbert Reithofer said on Aug. 1. The Munich-based company on that day reported its first drop in quarterly operating profit in almost three years.
German exports “will weaken over the coming months,” said Tobias Blattner, an economist at Daiwa Capital Markets Europe in London. “Slowing demand from the U.S. and China will be a drag on the foreign sales of Germany, which so far has been the growth engine of the region’s economy.”
Adding to signs the economic slump is spreading from the euro region’s periphery nations to the core, German investor confidence unexpectedly fell for a fourth straight month in August. Germany’s executives also grew more pessimistic in July and French manufacturing continued to shrink last month.
Markit Economics in London is scheduled to release an initial estimate of a composite index for euro-area services and manufacturing output for August on Aug. 23. The EU statistics office will publish a breakdown of second-quarter gross domestic product next month.
Source: Bloomberg
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