The external trade surplus narrowed by 44.0% y/y to EUR 556mn in June, the statistical office (KSH) reported preliminary data. The trade surplus amounted to EUR 3,328mn in H1 and was down by 19.1% y/y due to worse terms of trade and strong domestic demand.
The deterioration of the trade balance in June alone was due to significant weakening of the export performance. Exports fell by 6.1% y/y during the month and nominal exports were last that bad in Dec 2012. We think this was to a large extent on account of calendar effects, judging by the earlier industrial output data. Nevertheless, the underlying export growth likely weakened in the month as well, in our view, because the eurozone slowdown has started to weigh over the favourable base effects in the local car industry.
We expect that the foreign trade surplus will continue to shrink in the next months as imports should remain fairly strong despite some expected slowdown in domestic demand. Imports also fell by 1.7% y/y in June, which we also attribute to working-day effects and to the slowdown in input imports for the export-oriented industries. We believe they will continue to outperform exports due to the weakening external demand and unfavourable terms of trade.
The KSH is due to publish the detailed external trade data for H1 on Sep 3.