EMU: Merchandise Trade

Fri Apr 15 04:00:00 CDT 2016

Consensus Actual Previous Revised
Level E21.5B E20.2B E21.2B E22.8B
Imports-M/M 2.6% -1.3%
Imports-Y/Y 2.0% -1.0%
Exports-M/M 0.7% -1.6%
Exports-Y/Y 1.0% -2.0%

Seasonally adjusted, the merchandise trade balance returned a E20.2 billion surplus in February, down from an upwardly revised E22.8 billion in January.

The decline in the black ink masked a 0.7 percent monthly rise in exports, although this only dented January's 2.1 percent drop, and reflected instead a 2.6 percent spurt in imports that unwound most of the 2.9 percent drop posted at the start of 2016. Compared with a year ago, exports were up an unadjusted 1.0 percent, half the rate registered by imports. However, both sides of the balance sheet remained short of their 2015 highs.

The February data put the average surplus over the first two months of last quarter at E21.5 billion, just 0.3 percent above the fourth quarter mean when total net exports subtracted 0.3 percentage points from economic growth.

Despite its rebound since the middle of last year the euro's trade weighted index is still around 10 percent weaker than its peak levels in early 2014. This suggests that current levels of the exchange rate should still be competitive enough to boost the real trade balance going forward. Eurozone policymakers will certainly be hoping so as the recovery in domestic demand remains disappointingly 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. 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.