Euro-Area Exports Fell Second Straight Month in April

Euro-area exports declined for a second month in April, adding to signs of continued weakness in the 17-nation economy in the second quarter.

Exports from the euro-area fell a seasonally adjusted 1.3 percent from March, when they dropped 1 percent, the European Union’s statistics office in Luxembourg said today. Imports decreased 3 percent. Employment decreased 0.2 percent in the first quarter from the previous three months, when it fell 0.3 percent, a separate report showed.

Europe’s economy may contract in the second quarter after it stagnated in the first three months of the year and at least eight nations slipped into a recession, a Bloomberg survey shows. With the fiscal crisis worsening and euro-area economic confidence at the lowest in 2 1/2 years, companies have relied on faster-growing markets to bolster sales. Remy Cointreau SA, France’s second-largest distiller, reported a gain in full-year profit on June 12 on Asian demand.

“We expect the euro-region economy to shrink in the second and third quarters, putting it back into a technical recession,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “There are enormous divergences among the countries; Germany and France are still relatively robust. The more serious the fiscal crisis weighs on nations, the larger the contagion effects to the overall economy.”

Euro Drop

The euro has depreciated about 3.4 percent against the dollar during the past two months as the euro zone’s worsening fiscal crisis increased investors’ concerns about a breakup. It traded at $1.2631 at 11:08 a.m. in Frankfurt.

The euro area’s trade surplus widened to 6.2 billion euros ($7.8 billion) from 3.7 billion euros in the previous month, today’s report showed. Employment dropped 0.5 percent in the first quarter from a year earlier.

While Germany’s expansion helped soften an economic slump in the first quarter, indicators have since weakened. German business confidence dropped more than economists had forecast in May, while euro-area services and manufacturing output contracted at the fastest pace in almost three years. Unemployment held at a record high in April.

Prada SpA, the Italian maker of $2,950 perforated patent-leather handbags, said on June 7 that there are “rising risks deriving from the uncertain international economic environment.” Remy Cointreau said earlier this week that Asian demand is helping offset tougher conditions in Europe, which is suffering from “an uncertain economic” environment.

ECB Measures

Exports to the U.S. rose a non-seasonally adjusted 12 percent in the first three months from a year earlier, while shipments to the U.K., the euro area’s largest market, increased 6 percent, today’s report showed. Exports to China and Russia surged 9 percent and 19 percent, respectively, and Japan shipments climbed 10.7 percent. Detailed trade data are published with a one-month lag.

The European Central Bank’s June forecasts show that the euro-region economy may shrink 0.1 percent this year before expanding 1 percent in 2013. Exports may rise about 2.6 percent this year and 4.4 percent in 2013, it said, down from a March forecast of 3.2 percent and 5.5 percent, respectively.

ECB President Mario Draghi said on June 6 that the central bank stands “ready to act” should the debt crisis damp the euro-area economy further and that “a few” council members had pushed for a rate cut at the policy meeting.

Jens Sondergaard, senior European economist at Nomura International Plc in London, said on June 13 that the ECB should lower borrowing costs by 50 basis points and “launch outright quantitative easing” to fight the turmoil if needed. Markets “are behaving as if we are heading toward a breakup and this is very, very worrying,” he said.

“I could imagine that the ECB will have to open the floodgates a little bit further,” NordLB’s Kramer said. “But I don’t see any QE.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE