27 Jul 2013
Flash: European periphery in need of restructuring? – Goldman Sachs
FXstreet.com (New York) - The Economics Research Team at Goldman Sachs analysis the trade in terms and ‘value added’ shipments in the Eurozone.
Key quotes
“The economic restructuring in the periphery – which is necessary for Euro area rebalancing – does not require a large structural shift out of services into the manufacture of goods. This is because services are more ‘tradable’ than commonly believed in value added terms (as they provide significant value added in the production of goods that are then exported).”
“The ultimate source of final demand as the key driver of exports – not exports’ initial destination. A large share of the Euro area’s gross exports to China is re-exported elsewhere, implying that trade is not nearly so sensitive to a decline in Chinese final demand.”
“This suggests that the Euro area will be more resilient to a loss of momentum in China than implied by the traditional view of trade based on the initial destination of gross shipments.”
Key quotes
“The economic restructuring in the periphery – which is necessary for Euro area rebalancing – does not require a large structural shift out of services into the manufacture of goods. This is because services are more ‘tradable’ than commonly believed in value added terms (as they provide significant value added in the production of goods that are then exported).”
“The ultimate source of final demand as the key driver of exports – not exports’ initial destination. A large share of the Euro area’s gross exports to China is re-exported elsewhere, implying that trade is not nearly so sensitive to a decline in Chinese final demand.”
“This suggests that the Euro area will be more resilient to a loss of momentum in China than implied by the traditional view of trade based on the initial destination of gross shipments.”