New EU data out on Friday showed the eurozone logging a record trade surplus and bumper cash earnings in what some analysts said was evidence that austerity and structural economic reforms pay off.
However, the devil in the detail for others was a huge depreciation year-on-year in the real-terms value of the single currency and darker signals from more recent Chinese trade data — with a prolonged recession still tipped into next year.
The Eurostat agency said the 17-nation eurozone’s surplus in the trade of goods surged to 14.9 billion euros in June ($18.4 billion), the highest since the European Union began collating numbers in 1999.
The preliminary headline figure was up from just 200 million euros for the same month in 2011. Seasonally-adjusted exports rose by 2.4 percent compared to May, while imports remained stable.
At the same time, the European Central Bank in Frankfurt announced that the eurozone’s current account surplus grew to 12.7 billion euros in June from 10.3 billion in May.
The current account on the balance of payments, which includes imports and exports in both goods and services plus all other current transfers, is a closely tracked indicator of the ability of a country or area to pay its way in the world.
It is crucial for the long-term confidence of investors and trading partners.
“The eurozone is on the right track,» said analyst Christian Schulz at Germany’s Berenberg Bank.
“Structural reforms improve competitiveness and austerity reduces imbalances. If this process continues — and Germany and the ECB are doing their best to ensure that — the eurozone can emerge from this crisis as a much more dynamic and competitive economy.”
Schulz highlighted increases in export volumes for those countries most troubled by the debt crisis: 1.0 percent for Spain, 4.0 percent for Italy, 9.0 percent for Portugal and 17.0 percent for Greece.
“Companies have to look for foreign buyers to replace austerity-hit domestic demand and wage restraint and leaner production improve competitiveness,» he underlined.
Indeed, for the first half of the year the eurozone had a goods trade surplus of 26.6 billion euros, compared with a 23.0 billion euro deficit during the same period in 2011.
Meanwhile, the ECB data showed that over the 12 months to June, the current account showed a surplus of 49.9 billion euros, compared with a deficit of 18.8 billion euros in the corresponding period a year earlier.
Not all economists were as enthusiastic, though.
At Barclays, again in London, Julian Callow said there had been a «significant depreciation» in the euro’s effective exchange rate, that he calculated at around 8.0 percent year-on-year measured on a trade-weighted index.
Callow said «a combination of the weaker euro and some underlying demand expansion from emerging economies» was supporting eurozone exports, but that much of the latter up until June had been fuelled by China, whereas more up-to-date data from Beijing signals a «setback» for eurozone exports in July.
Exports and imports in China, the world’s second-biggest economy, slowed for the second consecutive month in July, imports rising 4.7 percent year-on-year to $151.8 billion, compared with June’s 6.3 percent increase.
Callow stressed: «Euro area exports have been slowing, and this trend also seems likely to continue.”
Meanwhile, with fiscal austerity «far from over,» he tipped domestic demand across the eurozone — home to around 320 million people — to contract this year by 1.0 percent, dragged down by the economic collapse along its southern Mediterranean rim.
“With global growth slowing, we don’t expect the resilience of the core’s exports to last much longer,» London-based Capital Economics added.
Focused primarily on growth indications and anticipating a prolonged downturn, its economists added of subdued domestic demand: «We still see both Germany and France slipping into recession in 2013.”