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Euro Zone Swings to Trade Surplus in April

The euro zone unexpectedly swung to a trade surplus in April from a deficit in March, data showed on Tuesday, as the region's strong currency failed to subdue exports and imports expanded quickly.

The external trade surplus of the 15 countries using the euro came to 2.3 billion euros ($3.57 billion) in April, compared with a revised deficit of 1.5 billion euros in March and a 2.0 billion euro surplus 12 months earlier.

"The data is volatile on the month-to-month basis. All in all for the time being, the euro, all the external headwinds, are not the main hurdle for the euro zone," said Gilles Moec, economist at Bank of America.

"It's the inflationary shock brought about by food and oil prices that is weighing over the economic activity in the euro zone. It is more important for the time being than the appreciation of the euro or slower external demand."

Economists polled by Reuters had expected a trade deficit of 1.4 billion euros for April.

According to seasonally unadjusted data, exports and imports both rose 16 percent, suggesting euro zone economic weakening might not be as deep as many analysts had feared and boosting the case for an interest rate rise by the European Central Bank.

Seasonally adjusted, the euro zone surplus in April came to 2.2 billion euros against a deficit of 1.1 billion euros the previous month as exports increased 6.2 percent month-on-month and imports rose 3.6 percent.

"The current ongoing resilience of euro zone exports is likely to reassure the ECB about the current health of the euro zone economy and reinforces belief that the bank will press ahead with a 25 basis point interest rate hike from 4.00 percent to 4.25 percent at its 3 July meeting," said Howard Archer, chief European economist at Global Insight.

Detailed data for April was not yet available.

A breakdown for the first three months of 2008 showed the trade deficit in energy widened to 74.5 billion euros from 52.7 billion in the same period of 2007, as oil prices kept rising.

But despite the strong euro, the region's surplus in manufactured goods trade increased to 67.7 billion euros in the first quarter from 55.1 billion in the same period of 2007.

In the first quarter, the currency area's trade deficit with China fell slightly to 27 billion euros from 28.3 billion in the first three months of 2007.

But the trade deficit with Russia, a major energy supplier to the euro zone, rose to 10.7 billion euros from 8.2 billion.

Contact Europe: Economy

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