Eurozone Trade Surplus Hits Record as Exports Rise -- Update

The eurozone's trade surplus with the rest of the world during March was the widest since the single currency was launched in 1999, as exports jumped.

The surge in exports to a record is another indication that the currency area is set to end the fourth year of its recovery on a high. But it may also reinforce concerns in the U.S. administration about the value of the euro on foreign exchange markets, and a trade deficit with the eurozone that appears to be growing.

In a separate release Tuesday, the European Union's statistics agency confirmed that the combined gross domestic products of the currency area's 19 members was 0.5% higher than in the final three months of 2016, and 1.7% higher than in the first quarter of that year.

Eurostat didn't provide a breakdown of the sectors driving growth in the first three months of the year, but figures from national statistics agencies suggest a pickup in investment was offset by a slowdown in consumer spending.

And while trade probably didn't boost growth over the quarter as a whole, exports were a factor as the quarter drew to a close.

Exports of goods from the eurozone stood at EUR202.3 billion ($221.5 billion) in March, a 13% rise from the same month in 2016. While imports climbed at a slightly faster pace, that didn't stop the surplus from widening to EUR30.9 billion, the largest since records began in 1999.

The eurozone's trade surplus with the U.S. appears to have widened in the early months of this year. Eurostat provided figures for the 28-member European Union that showed the bloc exported EUR30.6 billion more in goods to the U.S. than it imported from the world's largest economy during the first quarter, an increase from EUR23.6 billion in the same period of 2016.

Shortly after Donald Trump became U.S. president, his trade adviser accused Germany of using a "grossly undervalued" euro to "exploit" trading partners. German officials rejected that charge, noting that they have no control over the euro's exchange rate, which is influenced by the European Central Bank's monetary policy.

But in a speech Friday, ECB governing council member Philip Lane said the ECB's support for the eurozone's recovery has little relied on a weakening of the euro, and much more on an improvement in financial conditions within the currency area.

The steady start to the year has underpinned confidence in the eurozone's recovery, which many economists had expected to falter in 2017 as higher energy prices lowered consumers' spending power, and political uncertainty undermined confidence. As a result, the euro has strengthened, and Tuesday reached a seven-month high against the U.S. dollar.

The European Commission last week raised its 2017 economic growth forecast to 1.7% from 1.6%, expecting the currency area to expand at the same pace as in 2016. Rate setters have also become more upbeat about the outlook for 2017, with European Central Bank President Mario Draghi last week telling Dutch lawmakers that the recovery is "firming and broadening."

However, the central bank is set to remain cautious as it considers whether and when to ease back on the stimulus measures it has launched since mid-2014, because there are as yet few signs that the recovery is driving a sustainable pickup in inflation.

"It is too early to declare success," Mr. Draghi told Dutch lawmakers.

While the recovery has firmed, it has yet to do so in all parts of the eurozone. Figures released Tuesday showed Italy's economy continued to lag the rest of the currency area, expanding by just 0.2% over the first quarter--that isn't expected to change this year or next.

Economists see a troubled banking sector incapable or unwilling to provide much needed credit to the economy coupled with political uncertainty as the main obstacles to investments and faster growth.

Local lenders struggle under the weight of roughly EUR350 billion in problematic loans that they strive to digest or sell, while struggling to make money in ultralow to negative rates environment.

"Italy's long-term stagnation reflects its low labor productivity and investment growth," wrote analysts at S&P Global Ratings in a report published Monday. "In an uncertain political climate, 2017 could prove to be a lost year in terms of much needed reforms."

New national elections need to happen by May next year or before. Political risk consulting firm Teneo Intelligence sees the likelihood of snap elections in the autumn of this year at 25%.

Write to Paul Hannon at and Giovanni Legorano at

(END) Dow Jones Newswires

May 16, 2017 07:30 ET (11:30 GMT)