The seasonally adjusted red ink on merchandise trade expanded from an upwardly revised E3.3 billion in April to E4.0 billion in May, the second largest deficit of 2015 to date.
The latest deterioration reflected a combination of weaker exports and stronger imports. The former fell 0.6 percent on the month, their first drop since January, and would have declined more sharply but for a strong performance in the aviation subsector. Compared with May 2014, overall exports were up 5.4 percent. Imports on the other hand expanded a monthly 1.2 percent to stand just short of March's record high with transport equipment and intermediate goods seeing especially strong local demand. Even so, annual import growth was a relatively mild 2.7 percent.
May's setback still leaves the average shortfall over the first two months of the second quarter 7.3 percent smaller than the first quarter mean when total net exports subtracted some 0.5 percentage points from the quarterly change in real GDP. This points to a possible modest positive contribution from net external trade in April-June. However, amidst some indications of slower final domestic demand, economic growth remains on course to fall short of the previous period's 0.6 percent rate.
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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