EMU: Merchandise Trade

Fri Nov 13 04:00:00 CST 2015

Actual Previous Revised
Level E20.5B E19.8B E19.0B
Imports-M/M 0.5% 0.2%
Imports-Y/Y 2.0% 3.0%
Exports-M/M 1.1% -1.3%
Exports-Y/Y 6.0% 6.0%

The seasonally adjusted merchandise trade balance was in a E20.1 billion surplus in September, up from a slightly smaller revised E19.0 billion in August.

The headline improvement reflected a monthly 1.1 percent rise in exports that only partially offset August's 3.9 percent slump and a 0.5 percent gain in imports, their first increase since June. Unadjusted annual export growth now stands at 6.0 percent while imports are 2.0 percent higher on the year.

The flash third quarter Eurozone GDP estimate (just released) did not include expenditure components. However, with the quarterly trade surplus just 0.2 percent above its second quarter outturn despite softer energy prices, the chances are that net exports had a small negative impact. Euro weakness should benefit exports in due course but for now it seems that the benefits of enhanced competitiveness are being wiped out by slowing growth of overseas 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.