The seasonally adjusted trade deficit narrowed from an unrevised E3.7 billion in January to E3.5 billion in February.
The modest improvement reflected a 1.4 percent monthly rise in exports that more than offset a 0.6 percent increase in imports. Higher sales of aircraft and satellites and a rebound in chemicals were the main drivers behind the pick-up in exports. Imports were lifted by gains in autos, pharmaceuticals, electrical equipment and clothing but hit by weaker energy costs. Annual growth of exports now stands at 3.0 percent while imports are up 1.5 percent on the year.
Net exports helped to ensure that the French economy kept its head above water in the fourth quarter of 2014. The average January/February trade deficit is also nearly 2 percent less than the fourth quarter mean but with much of this attributable to smaller fuel bills, the chances are that its impact will be rather less positive this time.
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. In France the main focus is the balance on trade in goods.
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 currency values in foreign exchange markets. Given the size of the French economy, the euro can be sensitive to changes in the trade balance. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of 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.
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