EMU: Merchandise Trade

December 16, 2016 04:00 CST

Consensus Actual Previous Revised
Level E25.2B E19.7B E24.9B E24.4B
Imports-M/M 2.9% -1.6% -1.7%
Imports-Y/Y -3.0% -2.0%
Exports-M/M -0.3% -0.5%
Exports-Y/Y -5.0% 2.0%

The seasonally adjusted trade balance was in a E19.7 billion surplus in October, a sizeable drop from a downwardly revised E24.4 billion in September and well short of market expectations. The unadjusted black ink stood at E20.1 billion, a E3.1 billion fall from the same month a year ago.

The deterioration to what was the smallest surplus of the year so far reflected a combination of weaker exports and stronger imports. The former were down 0.3 percent on the month after a 0.5 percent fall in September while the latter rose 2.9 percent following a 1.7 percent decline last time. Annual export growth now stands a minus 5.0 percent while imports are off 3.0 percent.

Looking ahead, the slide in the euro, which yesterday touched its weakest level against the dollar since 2003, should underpin the surplus in 2017 although rising import costs could well hit the headline balance before volumes begin to respond. In any event, total net exports should provide some support to Eurozone economic growth going forward.

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.