EMU: Merchandise Trade

Wed Apr 15 04:00:00 CDT 2015

Actual Previous Revised
Level E22.0B E7.9B E21.2B
Imports-M/M 2.6%
Imports-Y/Y -3.0% -6.0%
Exports-M/M 2.8%
Exports-Y/Y 2.0% 0.0%

The seasonally adjusted merchandise trade balance returned a surplus of E22.0 billion in February, up E0.8 billion from the January print (not available in the last report). Unadjusted the black ink was E20.3 billion, some 41 percent above its year ago post.

The improvement in the adjusted headline reflected expansion in both sides of the balance sheet with exports, 2.8 percent higher on the month, just outpacing imports (2.6 percent). Compared with February 2014, exports grew 2.0 percent but imports declined 3.0 percent on the back of sluggish domestic demand.

The latest figures put the average surplus for the first two months of last quarter at E21.6 billion, an increase of 2.0 percent versus the October-December period. However, with imports having been depressed by weak energy prices, the chances are that net trade volumes provided at best only limited support for first quarter real GDP growth. That said, the slide in the euro has improved the region's competitiveness and this should translate into a larger contribution as the year pans out.

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.