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Trade deficit continues to ease
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Growth of trade deficit slowed down by lower negative contribution from energy balance.
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In the first four months of 2007, exports of goods and services reported nominal growth of 7.5%, one decimal more than imports. Export prices were up 3.5% putting the real increase at 3.9%. On the other hand, the slight increase in import prices (0.3%) meant that the real rise was 7.0%, twice that for exports.
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In the period under consideration, the trade deficit came to 29.98 billion euros, 7.1% higher than the figure for one year earlier. Growth of the trade deficit continued to ease although this was thanks entirely to the easing of the negative figure in the energy balance. Growth of the deficit generated by non-energy goods stabilized, as may be seen in the following graph.
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Capital goods sectors and motor vehicles take up 40% of sales abroad.
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From January to April, nearly all export sectors showed a positive performance. In nominal terms, sales of capital goods were up 5.3% year-on-year and those for cars rose by 7.6%. Both sectors reached a share of total exports close to 20% each. Other groups to record notable growth were those in food and chemical products, showing increases above 9%.
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Increased volume of trade with European Union.
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With regard to imports, we should mention the increase in value of capital goods purchases (12.7% year-on-year) boosted by the drive seen in investment in Spain and in consumer durables (14.7%) in keeping with the growth rate of consumption. The value of energy products bought was down by 8.3% because of the drop in cost of oil and oil-derivatives.
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From a geographical point of view, the increase in exports to the European Union (7.9%) went above that for all other countries (6.6%) although in the latter group the increases in sales to Russia (40.6%) and the OPEC countries (15.1%) were of note. In this way, the increase in Spain’s purchases from the European Union (7.6%) was higher than those going to all other countries (7.0%).
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Balance of payments: trade deficit stabilizing
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Current account balance deficit holds at 88 billion euros.
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In the first three months of the year, the deficit in the current account balance was 25.49 billion euros, some 3.37 billion euros higher than the result for the same period last year. The trade deficit is tending to ease and has been showing a downward trend since the end of last summer. While it still represents nearly two-thirds of the current account deficit, it contributed only 565 million euros to the worsening of the current account balance. On the other hand, the worsening of 2.34 billion euros in the incomes balance explains two-thirds of the increase. Also taking on new significance is the deficit in the current transfers balance which, in the period under consideration, underwent a worsening of 368 million euros.
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Lower downslide in trade deficit compensated by increase in net outflows for current transfers and incomes.
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In financial account, we note an improvement in the negative balance of direct investment but this is less drastic that what we see in the year-on-year comparison due to the substantial base effect. This was due more to a slowdown in foreign investment abroad than the entry of funds from outside.
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Seen more from a trend point of view, in the past 12 months ending March 2007, the cumulative deficit in the current account balance was 88.11 billion euros, thus repeating the figures for February and adding 17.32 billion euros to the negative balance for the same period the year before. This drop accounts for 49% of the increase in the trade deficit whereas one year ago it was 73%. The rest may be attributed to the sum of the incomes balance and the current transfers balance whose negative contribution should go up in view of more recent trends.
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Drop in flows for direct investment, both in and out.
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With regard to financial account, in the 12 months ending in March, net direct investment outflows amounted to 31.53 billion euros, very much in line with the month before and now leaving out the distorting figure for February 2006. Both outflows and inflows for direct investment, however, continued to show a definite downward trend.
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