EMU: Merchandise Trade

Thu Aug 17 04:00:00 CDT 2017

Actual Previous Revised
Level E22.3B E19.7B E19.0B
Imports-M/M -4.1% 1.6%
Imports-Y/Y 6.2% 16.4%
Exports-M/M -1.9% 2.1%
Exports-Y/Y 3.9% 12.9%

The seasonally adjusted trade balance was in a E22.3 billion surplus in June following a downwardly revised E19.0 billion surplus in May. Unadjusted, the black ink stood at E26.6 billion, down from E28.8 billion in June 2016.

The headline gain reflected a 1.9 percent monthly decrease in seasonally adjusted exports that nearly reversed a 2.1 percent monthly increase in May. This put annual unadjusted exports growth at 3.9 percent. The contraction in exports was sharply exceeded by a 4.1 percent decline in imports following a 1.6 percent monthly increase in May. Compared to the year-ago level, imports were up 6.2 percent.

The June surplus puts the average monthly surplus in the second quarter more than 7 percent above the mean in the first quarter, when net exports had a neutral impact on real GDP growth. The second quarter impact will probably be slightly more positive.

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.