Weakening Export Import Picture

The merchandise trade surplus widened slightly on a monthly basis in August, from €2.9bn to €3.1bn, but the value of goods exports and imports both declined sharply. The value of goods exports fell by 10.7% over the month, while the import bill slumped by 12.3%.

Analysis

The merchandise trade surplus registered a modest rebound from the 23-month low recorded in July, but at €3.1bn remained well below the monthly average of €4.2bn registered for the first half of 2014. Trade flows have weakened sharply in recent months, as the fallout from the Russia-Ukraine crisis has weighed heavily on business sentiment across the euro zone, and in response to a softening of demand from emerging markets. Goods production and new export orders in key trading partner economies including Germany, France and Italy have slowed significantly, constraining activity in the Netherlands' "open" economy. This latest set of trade data were the first to reflect the Russian ban on imports of food and dairy products from EU countries, which was announced in early August.

Given that external demand has been the main driver of the stuttering economic recovery over the past year, this deteriorating export picture presents a clear risk to near-term growth prospects. The monthly "export radar" published by the Centraal Bureau voor de Statistiek (CBS, the national statistics office) revealed a significant worsening of companies' expectations for their export performance in October, with five of the six indicators covered by the survey weakening over the month. The only improvement was in exchange rates, with companies anticipating a further depreciation of the euro.

According to the monthly data, the value of goods exports totalled €32.2bn in August, versus €33.9bn a year earlier. Exports to EU countries were down by 4%, while shipments outside the EU were 7.2% lower. Over the first eight months of 2014 the value of goods exports was 1.3% below its year-earlier level. The value of goods imports amounted to €29.1bn in August, down 3.8% from its year-earlier level and the lowest monthly import bill since April 2011. Imports from the EU fell sharply, by 8.2% year on year, in contrast to a modest rise in shipments from outside the bloc.

Impact on the forecast

We may revise lower our forecast that export volumes of goods and services will grow by 2% in 2014 and, consistent with this, review our real GDP forecast.

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