EMU: Merchandise Trade

Wed Mar 18 05:00:00 CDT 2015

Actual Previous
Level E7.9B E23.3B
Imports-Y/Y -6.0% 1.0%
Exports-Y/Y 0.0% 8.0%

The unadjusted merchandise trade balance was in a E7.9 billion surplus in January, a sharp improvement on the E0.1 billion posted in the same month a year ago. Note that Eurostat were unable to release seasonally adjusted figures due to technical problems.

The annual headline improvement was attributable to weak imports which fell 6.0 percent versus January 2014. Exports were only flat over the period.

Without the benefit of seasonally adjusted data it is not possible to draw any meaningful conclusion about short-term developments in the Eurozone trade balance. However, the combined benefits of low oil prices and a weak currency should ensure that the black ink steadily expands over the course of 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.