20 August 2003, 14:06  Eurozone June trade surplus dented as exports fall

BRUSSELS, Aug 20 - The euro zone ran a trade surplus of 5.4 billion euros in June, about half the size of the surplus it posted a year earlier, as exports fell, the European Union statistics office said on Wednesday. The latest evidence of the damage that weak global demand and euro appreciation have wreaked on euro zone exporters confirmed a trend that led the euro zone's surplus for the first six months of the year to shrink to 20.0 billion euros from 40.8 billion euros in the same period a year earlier.
That decline came even though May's trade surplus was revised up to 4.5 billion euros from a previously reported 3.7 billion euros. Imports stagnated in June compared with a year earlier but exports fell five percent over that period. In the first half of the year exports were down four percent from the same period in 2002 while imports remained steady. This suggests the past appreciation of the euro is still pinching exports even though the single currency has more recently given up some gains. The euro rose to record highs against other major currencies earlier this year, eroding euro zone exporters' competitiveness and the value of their foreign currency earnings at a time when global demand was already weak.
The latest example of the pain inflicted by the stronger euro and sluggish global demand came on Wednesday as Dutch logistics group Vopak said its first half operating profits fell 25 percent due to poor markets and currency effects. It is not the only firm to be hit by exchange rate moves -- the European Commission said in July that the euro's rise in the second quarter of this year had eroded euro zone producers' competitiveness by 3.5 percent. The impact of the euro's past appreciation at a time of weak global economic activity was also evident in French data on Wednesday which showed the euro zone's second biggest economy contracted by 0.3 percent in the second quarter of 2003 as exports, consumer spending and investment all fell. Still, the euro has retreated from its peaks and on Tuesday hit its lowest in 3-1/2 months against the dollar.
"The current rate (that the euro is trading at against the dollar) offers good hedging potential and will give (temporary) relief to exporters," Anton Boerner, the head of Germany's BGA foreign trade and wholesalers association said on Tuesday.//

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