EMU: Merchandise Trade

Thu Jan 15 04:00:00 CST 2015

Actual Previous Revised
Level E20.0B E19.4B E19.6B
Imports-M/M 0.0% -1.3%
Imports-Y/Y -2.0% 0.0%
Exports-M/M 0.2% -0.3%
Exports-Y/Y 1.0% 4.0%

The seasonally adjusted merchandise trade balance returned a E20.0 billion surplus in November following a marginally larger revised E19.6 billion excess in October. The unadjusted black ink also stood at E20.0 billion, a marked improvement on its E16.5 billion reading a year ago.

The modest gain in the headline was courtesy of a 0.2 percent monthly increase in exports. This came after a 0.1 percent dip last time and left intact a gently rising trend. Even so, compared with November 2013 exports expanded just 1.0 percent. Imports were flat at their level in October when they contracted 1.2 percent and were 2.0 percent weaker on the year. The trend here is mildly negative, reflecting the ongoing weakness of Eurozone domestic demand.

The average October/November surplus stands at E19.8 billion, up some 4.4 billion from the third quarter mean and probably indicative of a much needed positive contribution from net exports to real GDP growth in the fourth quarter.

Merchandise trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade. For the Eurozone, monthly data are available for trade in goods; service statistics are released as part of the overall quarterly current account report. The headline trade data are not adjusted for seasonal factors and so should be viewed in relation to the year ago month. Seasonally adjusted figures are also available for monthly comparisons.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the local currency dollar in the foreign exchange market.

Imports indicate demand for foreign goods and services. Exports show the demand for Eurozone goods in countries overseas. The euro can be particularly sensitive to changes in the balance since a trade deficit/surplus can create greater/reduced demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of EMU trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.