FR: Merchandise Trade

Wed Oct 07 01:45:00 CDT 2015

Actual Previous Revised
Level E-3.0B E-3.3B E-3.2B

The seasonally adjusted merchandise trade balance returned a E3.0 billion shortfall in August, down from a slightly smaller revised E3.2 billion deficit in July.

However, the modest headline improvement reflected monthly declines in both sides of the balance sheet. Exports were off 3.0 percent and, at E37.7 billion, saw their weakest level since February. At the same time, imports fell a marginally steeper 3.2 percent to their weakest mark so far in 2015. Compared with August 2014 exports were 3.9 percent higher and imports 2.2 percent lower.

Despite the inevitably volatile pattern to the monthly data the trend in the red ink is moving in the right direction, helped in no small way by the slump in energy prices. The average deficit in July/August was 3.6 percent below its second quarter mean and much of this will be attributable to cheaper energy imports. Consequently, it seems unlikely that net exports will provide anything like the 0.4 percentage point boost to real GDP growth last quarter that it did in April-June. With domestic demand still struggling, the French recovery remains stubbornly sluggish.

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.