The seasonally adjusted trade deficit increased from a slightly larger revised E2.8 billion in June to E3.3 billion in July.
The headline deterioration was due to a 1.7 percent monthly fall in exports prompted by weaker overseas purchases of transport equipment which peaked in June. Imports were just 0.3 percent lower on the month, mainly due to a reduced oil bill and a decline in aeronautics. Together, these more than offset gains in other industries, notably autos. Compared with a year ago exports were up 8.0 percent while imports were just 1.5 percent stronger, the latter reflecting the combination of sluggish domestic demand growth and soft energy prices.
Total net foreign trade added 0.3 percentage points to quarterly economic growth in the April-June period and without this total output would have posted its first outright contraction since the second quarter of 2014. However, the shortfall on merchandise trade in July was 1.1 percent larger than the second quarter average warning that third quarter GDP will probably have to find support from elsewhere.
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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