EMU: Merchandise Trade

Thu Sep 15 04:00:00 CDT 2016

Actual Previous Revised
Level E20.0B E23.4B E23.8B
Imports-M/M 1.4% 1.5%
Imports-Y/Y -8.0% -5.0%
Exports-M/M -1.1% 0.5%
Exports-Y/Y -10.0% -2.0%

The seasonally adjusted merchandise trade balance was E20.0 billion in the black in July after a slightly larger revised E23.8 billion in June. Unadjusted the surplus stood at E25.3 billion, down from E31.1 billion a year ago.

The headline deterioration reflected a combination of weaker exports and stronger imports. The former were down 1.1 percent on the month to equal their weakest reading of the year to date while the latter were up 1.4 percent to stand at their highest level since February. Compared with a year ago, exports now show fall of 10.0 percent while imports are 8.0 percent weaker.

July's surplus was almost 18 percent below the average reading in the second quarter when total net exports effectively accounted for the entire quarterly increase in real GDP. Price swings cloud underlying volume trends but it looks unlikely that the external balance will provide as much support to economic growth this quarter.

The merchandise trade balance measures the difference between imports and exports of goods. 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; statistics on services are released as part of the overall quarterly current account report. The headline trade data are not adjusted for seasonal factors and so should only be viewed in relation to the outturn a year ago. However, seasonally adjusted figures available elsewhere in the report do allow 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.