EU export growth crashes to two-year low Vitaly

EU export growth crashed to a two-year low in Q3 2019, according to new research from accountancy and business advisory firm BDO LLP.

Sliding from 98.1 in Q2 to 96.4 in Q3, the BDO Export Growth Index – which provides snapshots of the export markets in Europe’s five largest economies – declined for the second consecutive quarter, edging dangerously close to the point of contraction (95.0).

In both the UK and Germany, the Export Growth Index is now below the 95 mark, which represents zero annual growth.

The UK recorded a 2.2 point fall, pulling the Index down to 93.9. This indicates that British exports to Europe contracted year-on-year in Q3 – the first time since 2015. Between the first and second quarters of the year, the UK’s exports plummeted by 3.3%, marking the sharpest decline in seven years. With growth on a downward trajectory across all key export markets, a marked recovery in Q4 appears unlikely.

Europe’s largest economy, Germany, experienced an even more significant annual contraction of exports in Q3 – with the Index falling by 3.7 points to 90.9.

German industrial production in August was 5.0% lower than it was at the same point last year, having been hit particularly hard by the continued weakness of the automotive sector. Out of the 28 countries in the EU, only Ireland, Romania and Slovakia have seen a sharper decline in industrial output over the past year.

France, Italy and Spain performed better, but also saw growth deteriorate in Q3, with the rate of export growth now below the long-run trend in all three countries.

Elsewhere in the report, the EU Export Inflation Index fell sharply to 95.0 in the third quarter of 2019. This marks a 9.5 point decline compared to the previous quarter, and means the rate of price growth for European exports is now around zero.

Commenting on the findings, Peter Hemington, Partner at BDO LLP, said: “European export growth is on the brink of contraction having experienced another challenging quarter – and worse is still to come as car sales stall and industrial production levels limp across Europe.

“Services are particularly important to the UK as they account for 80 per cent of our economy. While the US remains Britain’s largest services export partner – accounting for almost a quarter of UK exports in that category – it is concerning to see weakened growth with our closest trading bloc. Europe imported £28.56 billion worth of services from the UK between April and June 2019, compared to £30.27 billion during the same period in 2018, suggesting Brexit has already caused notable disruption.”

Overview of the BDO indices:

An overview of the Export Performance Indices are provided in the table below, detailing figures for the last four quarters, to allow for comparison.

Country Q3 2019
(figures for this report)
Q2 2019 Q1 2019 Q4 2018
BDO Export Growth Index EU 96.4 98.1 100 99.6
UK 93.9 96.1 100.8 98.7
Germany 90.9 94.6 97.5 96.4
France 95.8 100.8 101.4 99.2
Spain 98.4 100.5 94 95.7
Italy 97.4 98.5 97.2 97.9
BDO Export Inflation Index EU 95 104.5 105.5 108.2
UK 93 94.9 101.7 103.8
Germany 98.1 101.1 101.1 102.5
France 94.4 100.4 105 106
Spain 91.6 97.6 105.5 113
Italy 96.3 99.7 102.9 105.7