Here’s why EU imports and exports are seeing a downturn

The trading scenario within the European Union continues to encounter hurdles, with both the exporting and importing of goods undergoing a sustained downturn.

The most recent data from Eurostat revealed a concerning trend as exports fell for the third consecutive quarter, while imports faced a decline for the fourth successive quarter.

In the third quarter of 2023, EU exports and imports saw reductions of 1.2% and 4.6%, respectively, compared to the previous quarter.

Despite these challenges, the EU managed to achieve a trade surplus of approximately €18 billion, marking a stark contrast to the surplus of €6.9 billion observed in the same period of 2021.

What’s behind the decline?

The decrease in extra-EU imports during this period was notably attributed to a decline in imports of other manufactured goods (-€6.6 billion compared to Q2 2023), machinery and vehicles (-€6.2 billion), and energy (-€4.7 billion).

On the export front, machinery and vehicles (-€6.9 billion) and other manufactured goods (-€2.7 billion) experienced declines, while energy and chemicals saw increases of €3.4 billion and €3.2 billion, respectively.

Breaking down the figures for Q3 2023, the EU showcased a trade surplus of €15.6 billion for food, drinks, and tobacco, €50.4 billion for chemicals, and €49.6 billion for machinery and vehicles.

These surpluses surpassed the cumulative deficits recorded in other sectors, including -€93.9 billion for energy, -€5.9 billion for raw materials, and -€1.8 billion for other manufactured goods.

A noteworthy shift has occurred in the energy sector, where the trade deficit has steadily decreased from a record -€193.8 billion in Q3 2022 to -€93.9 billion in Q3 2023. This decline is attributed to falling prices for energy products, significantly impacting the sector.

The period between Q4 2021 and Q1 2023 witnessed an opposite trend as increasing prices led to a substantial trade deficit for energy. During this timeframe, the deficits in the energy sector outweighed surpluses in other product groups, emphasising the volatility and sensitivity of the EU trade balance to market fluctuations.

Meanwhile, the HCOB Eurozone Manufacturing PMI increased to 43.8 in November from October’s 43.1, marking the highest level in six months and surpassing market expectations of 43.4, preliminary estimates showed.

Despite this improvement, manufacturing production declined for the eighth consecutive month, though at a pace less severe than in previous months.