FR: Merchandise Trade

October 7, 2016 01:45 CDT

Actual Previous Revised
Level E-4.26B E-4.51B E-4.26B

The seasonally adjusted merchandise trade balance was in a E4.26 billion deficit in August, exactly matching its slightly smaller revised shortfall in July.

The unchanged headline masked an expansion in both sides of the balance sheet. Exports were 2.1 percent firmer on the month after a 0.6 percent rise in July to post their highest level since November last year. Transport equipment and intermediates were largely responsible for the advance here. At the same time, imports were up 1.8 percent versus July when they climbed 2.6 percent to reach their strongest mark in six months. Rises here were more broad-based.

The August data put the cumulative red ink over the year so far at E32.39 billion, a near-13 percent increase compared with the same period in 2015. Sluggish exports (annual growth of just 2.0 percent) are partly to blame and the economy would more than welcome a weaker exchange rate to boost domestic competitiveness.

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 and can offer a guide to an economy's competitiveness.

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.