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UPDATE 1-Euro zone Sept trade in deficit, exports outlook poor

Published 11/17/2008, 06:37 AM
Updated 11/17/2008, 06:40 AM

(Recasts with economist's comments)

By Jan Strupczewski

BRUSSELS, Nov 17 (Reuters) - A surge in imports pushed the euro zone into a trade deficit in September from a surplus a year earlier, data showed, and sharp economic slowdowns in its main trading partners bode ill for future euro zone exports.

The European Union's statistics office said the unadjusted external trade deficit of the 15 countries using the euro totalled 5.6 billion euros ($7.1 billion), compared to a 9.4 billion euro deficit in August and a surplus of 2.9 billion a year earlier.

Economists polled by Reuters had expected a 7.3 billion euro deficit for September.

The euro zone swung to a deficit because imports jumped 16 percent year-on-year, which economists blamed on a delayed effect of the July oil price peak. Exports rose only 9 percent.

With the economies of the euro zone's top two trading partners -- Britain and the United States -- slowing sharply, euro zone exports are likely to face more pressure, even despite the recent fall of the euro exchange rate, economists said.

"Sharply weaker global economic activity seems highly likely to increasingly outweigh the beneficial impact of the euro retreating further to currently trade around $1.25," said Howard Archer, economist at Global Insight.

"Particularly worrying for euro zone exporters is markedly contracting domestic demand in the UK and US, together with substantially slowing activity in emerging Europe," he said.

The trade figures only partially cover a period when the global financial crisis deepened sharply after the collapse of U.S. investment bank Lehman Brothers in mid-September.

Adjusted for seasonal factors, the September deficit remained unchanged from August at 5.7 billion euros, with imports and exports growing at roughly the same pace month-on-month.

"This (exports) resilience was clearly helped by the euro falling back sharply from a peak of $1.604 in early-July to average $1.44 in September," said Archer.

Detailed data for September was not yet available, but a breakdown for January-August showed a surge in the deficit in energy trade, despite falling oil prices, to 211.1 billion euros from 146.4 billion in the same period of 2007.

Crude oil costs fell significantly in August from a peak above $147 a barrel in July, but were still much higher than the $60-70 logged in the first half of 2007.

The increase in the energy deficit was partially offset by a higher surplus from manufactured goods, which increased to 197 billion euros in the first eight months of 2008 from 165.3 billion a year earlier, as the euro weakened against the dollar.

While the trade gap with China stayed unchanged at 71 billion euros in January-August, the deficit with energy exporter Russia rose to 28.4 billion euros from 20.6 billion a year earlier. (Reporting by Jan Strupczewski, editing by Dale Hudson/Toby Chopra)

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