(Dow Jones) The eurozone recorded the largest trade surplus in its existence during September as exports of goods continued to rise, a fresh indication that the euro’s appreciation against other major currencies has yet to crimp economic growth.
Adjusted for seasonal patterns, eurozone exports rose 1.1% in September from August, while imports fell 1.2%, the European Union’s statistics agency said Wednesday.
As a result, exports of goods exceeded imports by €25bn ($29.3bn), up from the €21bn surplus recorded in August and the highest since records began in January 1999, when the euro was launched.
The eurozone economy is on track to record its fastest expansion in a decade, with figures released Tuesday showing gross domestic product rose at a quarter-to-quarter rate of 0.6%, the equivalent of an annualised 2.5% rise.
Central bank reduces bond purchases
In response to the strengthening and broadening of the economic recovery this year, the European Central Bank last month announced it will reduce its bond purchases from January 2018, a first step toward weaning the eurozone off its massive support.
One concern for policy makers has been the euro’s appreciation against other major currencies, partly in anticipation of reduced central bank stimulus that makes exports more expensive for overseas buyers. That could have weakened the recovery, but Wednesday’s trade figures suggest stronger demand from a more rapidly going global economy has more than compensated for higher overseas prices.
Without seasonal adjustment, the trade surplus stood at €26.4bn in September, up from €24.3bn in the same month last year.
Currency movements and trade flows
The link between currency movements and trade flows seems to have weakened over recent years, as evidenced by the muted response of UK exports to the pound’s depreciation since a June 2016 vote to leave the European Union.
What has changed is where businesses source the things they need to make the products they export. Manufacturers once found most components needed to make their goods at home. Now they increasingly look abroad for such inputs. As a result, exports now incorporate a lot more imports, and currency movements have offsetting effects on the prices of goods sold overseas.