EMU: Merchandise Trade

Thu Jul 16 04:00:00 CDT 2015

Actual Previous Revised
Level E21.2B E24.3B E23.9B
Imports-M/M 0.0% -1.6%
Imports-Y/Y 0.0% 3.0%
Exports-M/M -1.5% 1.1%
Exports-Y/Y 3.0% 9.0%

The seasonally adjusted trade balance returned another healthy surplus in May. At E21.2 billion the black ink was short of April's slightly downwardly revised E23.9 billion but still above the E20 billion mark for the fourth time so far this year.

The deterioration in the headline reflected a 1.5 percent monthly fall in exports, their first drop since January. Imports were flat. Annual growth of the former was 3.0 percent and of the latter 0.0 percent.

At E2.6 billion the average surplus in April/May was 6.4 percent above its first quarter mean which points to a probable small positive contribution from total net exports to second quarter real GDP growth. Quite apart from the weakness of the oil market, the current soft level of the euro should help to ensure continued strong trade data over the rest 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.