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UPDATE 1-Euro zone July exports recover, Q3 GDP growth seen

Published 09/17/2009, 06:08 AM
Updated 09/17/2009, 06:12 AM
BNPP
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(Recasts with economists' comments)

By Jan Strupczewski

BRUSSELS, Sept 17 (Reuters) - Euro zone exports continued to recover in July and drove the trade surplus higher than expected, data showed on Thursday, boding well for a return to overall economic growth in the third quarter.

The European Union's statistics office Eurostat said that adjusted for seasonal factors, the trade balance was 6.8 billion euros in positive territory, up from 2.3 billion in June and 1.5 billion in May.

"Healthier trade developments reinforce belief that the euro zone will return to growth in the third quarter," said Howard Archer, economist at IHS Global Insight, noting trade already contributed positively to second quarter figures, helping limit the contraction of the economy to 0.1 percent on the quarter.

Seasonally adjusted exports grew by 4.1 percent in July against June, the second consecutive month of gains after June's 0.9 percent increase over May -- and a sign of improvement in external demand for euro zone goods.

Imports fell 0.3 percent against June after a 0.2 percent rise in June against May, pointing to continued weakness in domestic demand.

"We have a strong rebound in exports," said Dominique Barbet, economist at BNP Paribas. "More exports gains are likely ...in the coming months since the July level remains weak in absolute terms."

"This outcome is consistent with the recovery of manufacturing output. Of course, these are very good news for the third quarter growth outlook," Barbet said.

The seasonally unadjusted trade surplus in the 16-country area totalled 12.6 billion euros ($18.6 billion), compared with a 3.5 billion euro deficit a year before as exports fell 19 percent year-on-year and imports plunged 30 percent.

Economists polled by Reuters had expected a trade surplus of 5.2 billion euros. Eurostat revised up the June surplus to 5.4 billion euros from 4.6 billion.

"Imports will have to catch-up, the present gap being largely due to the continued desire by manufacturers and retailers to reduce inventories," Barbet said.

"This will come to an end, so that the trade balance should come back closer to equilibrium in the coming months," he said.

Detailed data for July was not yet available, but a breakdown for the January-June period showed the euro zone's trade deficit in energy was only two thirds of the gap a year earlier, thanks to a hefty fall in oil prices.

The euro zone's trade deficit with Russia, one of the main energy suppliers, almost halved to 12.3 billion euros in that period. (Reporting by Jan Strupczewski; Editing by Dale Hudson and Patrick Graham)

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