What's going on?

Europe appears to be buzzing: the eurozone�s trade with other regions jumped markedly in May versus a year ago, underlining the strength of the European economic recovery.

What does this mean?

The value of the eurozone�s exports jumped more than 12% versus a year ago, suggesting healthy demand for its products abroad. Trade with the rest of the world has been one of the key improvements for the eurozone�s economy over the past year or so (a relatively weak euro, versus other currencies, has helped).


Imports jumped even more, up 16% versus a year ago. This points to the strength of the eurozone economy: demand is growing such that it�s buying lots more stuff from other regions.

Why should I care?

For markets: The rising euro threatens the eurozone�s exports and economic growth.

The euro has jumped almost 10% so far this year versus the US dollar (and is also up against most other major currencies). That makes the eurozone�s exports more expensive, making them more difficult to sell. Any resulting drop in exports could put pressure on the profits of firms, like Volkswagen, that sell a lot of goods from Europe to the rest of the world � and would make it harder for the eurozone�s economy to grow.


The bigger picture: Unlike the US, the eurozone exports more than it imports.

Generally speaking, it is better if an economy exports stuff than if it imports stuff � it�s kind of like the difference between making money (i.e. selling things) and spending money (i.e. buying things). The eurozone has quite a large �trade surplus�, led by Germany whose exports outweigh its imports by more than other eurozone economies (in fact, it has the largest �trade surplus� of any country in the world). By contrast, the US imports much more than it exports. This is an economic disadvantage, which has become both a political and an economic issue.