Trade between eurozone member states contracted in June at the fastest pace in over six years, raising fears that the US-China trade dispute is starting to hit European exports.
The value of intra-eurozone trade, the amount each of the 19 countries are shipping to each other, dropped 6.6 per cent in June compared to the same month last year, the worst performance since March 2013.
“With intra-eurozone trade representing more than half of total exports for most European countries, this is a serious reason for concern and it threatens to become a vicious cycle,” said Angel Talavera, economist at Oxford Economics.
Eurozone exports to the rest of the world dropped by 4.7 per cent, marking the worst reading since August 2016.
Export performance in the single currency area has previously been largely resilient despite rising global trade tensions. Eurozone exports to the rest of the world grew 5 per cent in the five months to May compared to the same period last year.
The “raw materials” and “machinery and transport equipment” categories weighed on exports, with annual drops of 8.5 per cent and 7.5 per cent respectively.
Turkey continued to be a drag on trade figures with eurozone exports to the country falling 12 per cent compared to the previous year. Trade with the country has been suffering since the summer, largely as a result of a contraction in the Turkish economy.
More worryingly, eurozone exports to China contracted 3.4 per cent compared to the same month last year, which contrasted with a strong start to the year with double-digit growth rates. Eurozone food and drink exports to China remained resilient, reporting a 26 per cent annual expansion in June, but most other sectors saw a contraction including raw materials and machinery.
Monthly statistics can be volatile, but the broad-based slowdown is nonetheless worrying.
Eurozone exports to the US have also slowed dramatically from an 18 per cent expansion in May to only 1.2 per cent growth in June and a 20 per cent contraction in exports of raw materials.
Figures for eurozone exports to the UK are not available yet, but national statistics point to a continued fall in exports. Eurozone exports to the UK declined by an annual rate of 9 per cent in April and 6 per cent in May as British manufacturing production fell sharply, leading to a contraction in GDP growth in the second quarter.
“The decline in imports from the UK highlights once again, the impact that uncertainty regarding a no-deal Brexit is already having on the UK economy and, by extension, on eurozone exports given the importance of the British export market” said Mr Talavera.
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