FR: Merchandise Trade

December 7, 2016 01:45 CST

Actual Previous Revised
Level E-5.20B E-4.77B E-4.79B

The seasonally adjusted trade balance returned a E5.20 billion deficit in October, up from E4.79 billion in September and the largest shortfall since August 2014.

The jump in the red ink reflected a 0.8 percent monthly drop in exports compounded by a 0.3 percent rise in imports. The former, which declined for a second successive month and to the weakest level since March, suffered from a sharp a decline in aircraft deliveries. This masked a slightly better performance by manufactured goods. Imports were supported by sustained strength in purchases of aeronautical and natural hydrocarbon products.

The latest figures put the October deficit more than 18 percent above its third quarter average and so hardly bode well for the contribution of total net exports to real GDP growth this quarter. In the third quarter, net external trade hit economic growth by some 0.7 percentage points.

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.