Euro zone exporters should look beyond Chinese demand for growth

LONDON | The euro area continued to run a small trade surplus up to March. This is encouraging on account of stronger import prices, led by energy, in the first quarter of the year. But a closer look into the volumes suggests that import volumes are weakening. Estimates from Barclays Capital analysts put the declining at around 1% in January to March 2012 from the same period in 2011, after a drop of 3% in the last three months of last year, whereas export volumes grew slightly by around 1% in the last six months.

Overall, when official data are published, these should show that net trade continued to contribute positively. Nevertheless, Barclays experts have noticed that euro zone exporters hold too high expectations about their future sales to China. Further diversification should be in the plans to avoid disappointment if the Chinese economy cools down.

“On account of a combination of factors (weaker exports to Europe, domestic policy tightening, unwinding of construction excesses) we are seeing some signs of a slowdown in Chinese import demand up until April,” the report from Barclays said on Thursday.

“While euro area export growth is predicated upon more than exports to China alone (for example, exports to energy producing countries and to the Americas have generally been strengthening), nonetheless these global developments do suggest that the outlook for euro area exporters is likely to be cautious until global demand re-accelerates.”

The next charts show euro area merchandise trade volumes in an international context. One can see that the global trade environment did improve up to March, helped by recovery in Chinese trade.