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Stronger currency shrinks euro zone trade surplus in August

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Stronger currency shrinks euro zone trade surplus in August

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BRUSSELS (Reuters) – Euro zone’s trade surplus shrank in August as the stronger euro fuelled an import boom that was only partly offset by a rise in exports, official estimates released on Monday showed. Although the euro has depreciated against the dollar from a 2017 peak in early September, it is still up more than 12 percent this year. Cheaper imports have complicated European Central Bank’s plans to raise inflation in the euro zone. The European statistics office Eurostat said the 19-country currency bloc’s surplus in goods trade dropped to 16.1 billion euros (14.27 billion pounds) in August from 23.2 billion in July. It was also lower than in August 2016 when it stood at 17.5 billion euros. The lower surplus was caused by a surge in imports from countries outside the euro zone, which grew 8.6 percent on the year, according to seasonally unadjusted data. This rise outstripped the 6.8 percent increase in exports, resulting in a smaller surplus for the euro zone. The August surplus was the lowest recorded this year, excluding a temporary deficit in January. The strong euro, which peaked at nearly 1.20 dollars in August, contributed to the reduced surplus, as it made imports cheaper. This in turn capped inflation, making it harder for the ECB to tighten monetary policy. Inflation in the euro zone was 1.5 percent in September, according to Eurostat preliminary estimates, the same rate as in August and below the ECB target of a rate close to 2 percent. The ECB is expected to extend its stimulus programme for nine months at its next meeting on Oct. 26 while scaling back the monthly purchases, sources said.

(Reporting by Francesco Guarascio @fraguarascio; editing by Philip Blenkinsop)
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