EMU: Merchandise Trade

Mon Feb 16 04:00:00 CST 2015

Consensus Actual Previous Revised
Level E20.0B E23.3B E20.0B E21.6B
Imports-M/M -2.4% 0.0%
Imports-Y/Y 1.0% -2.0%
Exports-M/M -1.1% 0.2%
Exports-Y/Y 8.0% 1.0%

The seasonally adjusted trade balance was in a record E23.3 billion surplus in December, up from a stronger revised E21.6 billion print in November. Unadjusted the black ink stood at E24.3 billion, nearly double the comparable outturn a year ago. The results were on the high side of expectations.

However, the improvement in the headline masked weakness in both sides of the balance sheet. Hence, exports fell 1.1 percent on the month while imports were off a sharper 2.4 percent, their third straight decline. Versus December 2013 exports grew 8.0 percent but weak domestic demand again restricted imports to a modest 1.0 percent advance.

Still, the December report made for an average fourth quarter surplus of E21.7 billion, a significant expansion from the previous period's E15.7 billion. Although lower oil costs will have been an important factor here the signs are that net export volumes made a positive contribution to Eurozone real GDP growth last quarter. For 2014 as a whole the black ink weighed in at E194.8 billion after a E152.3 billion excess in 2013. Euro weakness should ensure that exports provide a still larger boost over 2015.

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.