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UPDATE 1-Euro zone imports and exports fall, outlook grim

Published 12/18/2008, 07:37 AM
Updated 12/18/2008, 07:40 AM
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(Adds economist comment)

By Jan Strupczewski

BRUSSELS, Dec 18 (Reuters) - Euro zone seasonally adjusted imports and exports fell in October against September, pointing to weakening global demand and underlining the risk of a deep recession in the single currency area.

The 15 countries sharing the euro had an unadjusted trade surplus of 900 million euros ($1.3 billion), down from 4.2 billion in October 2007, the EU statistics office said. Imports rose 3 percent year-on-year and exports gained 1 percent.

But seasonally adjusted, the euro zone logged a trade deficit in October of 1.3 billion euros, against a gap of 4.4 billion in September as exports fell 2.5 percent against the previous month and imports declined 4.6 percent.

"The financial crisis and the economic recession prompted a sharp decline in buying everywhere," said Dominique Barbet, economist at BNP Paribas.

"Uncertainty about future demand and the need to reduce inventories, which are more difficult to finance, requires a rapid adjustment. No significant recovery is forecast short-term. This set of data confirms our scenario of a serious recession associated with lower prices for manufactured goods."

Economists said the sharp monthly fall in imports most likely resulted from a drop in oil prices as well as weakening domestic demand in the recession-hit euro zone.

"The fall in exports indicates that weakening domestic demand in key euro zone export markets outweighed the marked retreat of the euro from its July highs," said Howard Archer, economist at Global Insight.

"The euro averaged $1.32 in October compared to its early-July peak of $1.60," he said.

The balance with the euro zone's top four trading partners -- Britain, the United States, China and Russia -- deteriorated in each case in January to September, the data, released on Thursday, showed.

With the economies of the two biggest -- Britain and the United States -- slowing sharply or in recession, euro zone exports are likely to face more pressure despite the recent fall in the euro, economists said.

In the first 10 months of 2008, imports grew by 10 percent against the same period of 2007 while exports rose 6 percent.

Detailed data for October was not yet available, but the trend was clear from the January-September numbers, which showed the energy trade deficit rising to 235.5 billion euros from 164.6 billion a year earlier. (Editing by Dale Hudson)

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