Export growth slowdown looks set to persist

After providing a big boost to GDP growth last year, net exports were a drag on growth in the first half of 2018. This does not look like a temporary response to heightened trade tensions. Instead, it largely reflects three developments: a slowdown after unusually-strong export growth in the second half of last year; the euro’s appreciation over the past 18 months or so; and slower economic growth overseas. In fact, euro-zone export growth has slowed to most destinations. But to the US, the only country to have imposed tariffs on the EU recently, export growth has picked up. Looking ahead, we think that export growth will continue to decline, albeit gradually, as growth elsewhere slows and the euro appreciates.