Exports (again)

Over the course of 2014, Spanish merchandise exports growth has been concentrated in the country’s core eurozone markets and geographical diversification has diminished notably. Chart 1 shows that exports to Germany, Italy, Holland and Portugal have all been increasing at a rate greater than their actual market share. Add the UK and the USA to that list and they have together managed to offset the negative effect on growth from the French slowdown. Exports to both Latin America and Africa have been decreasing, for their part. The increase in Eurozone share should be seen as a transitory effect due to the diminishing rate of GDP growth of emerging markets relative to the EZ and the composition of Spanish exports – notably the decrease in aircraft deliveries and better performance of car and truck exports – these latter mainly staying within Europe.

Soft indicators, like the EZ PMIs and consumer confidence surveys as well as the German IFO, fits imperfect as they are, are pointing to an imminent EZ slowdown. Is this unequivocal bad news? Only if you believe that the increased dependence of exports on the local region, making Spain more vulnerable to the current economic environment, is a structural change.

The month-on-month merchandise exports correction that might well be expected in August will likely, viewed  on an annual basis, be amplified far beyond its actual significance by that outsized spike in August 2013. Unless some large transport equipment delivery shows up to save the day, we’ll be left (as usual) searching for the substance amidst the same base effects noise that we described in our last entry.

Javier García Echegaray, with contributions from José Domingo Rosello and Charles Butler.