EMU: Merchandise Trade

Tue Sep 15 04:00:00 CDT 2015

Actual Previous
Level E22.4B E21.9B
Imports-M/M -1.0% 1.2%
Imports-Y/Y 1.1% 7.0%
Exports-M/M -0.7% 1.4%
Exports-Y/Y 7.0% 12.0%

The seasonally adjusted merchandise trade balance returned a record E22.4 billion surplus in July after an unrevised E21.9 billion excess in June. The unadjusted black ink stood at E31.4 billion, also a new high and up substantially from E21.2 billion in July 2014.

The modest improvement in the adjusted headline reflected a 0.7 percent monthly fall in exports that was more than offset by a 1.1 percent drop in imports. Annual growth of the former now stands at 7.0 percent and of the latter just 1.0 percent.

July's surplus was 3.2 percent larger than the second quarter average which bodes well for a positive contribution from net exports to real GDP growth in the July-September period. However, it looks unlikely to match the 0.3 percentage point boost provided in April-June so even a steady overall growth rate will probably need a stronger contribution from domestic demand.

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.