EMU: Merchandise Trade

January 16, 2017 04:00 CST

Consensus Actual Previous Revised
Level E20.8B E22.7B E19.7B E19.9B
Imports-M/M 1.8% 2.9% 2.5%
Imports-Y/Y 5.0% -3.0% -3.2%
Exports-M/M 3.3% -0.3% -0.1%
Exports-Y/Y 6.0% -5.0% -4.5%

The seasonally adjusted trade balance returned a E22.7 billion surplus in November following a slightly larger revised E19.9 billion in October. Unadjusted the black ink stood at E25.9 billion, up from E22.9 billion a year ago.

The improvement in the adjusted headline was wholly attributable to stronger exports which rose 3.3 percent on the month, their first gain since August. Imports expanded a more modest 1.8 percent, down from a 2.5 percent rate last time but their fifth positive reading in the last six months. Unadjusted annual export growth now stands at 6.0 percent, a percentage point above its import counterpart.

The latest data put the average surplus in October/November nearly 4 percent below its mean level in the third quarter when total net exports subtracted 0.1 percentage points off quarterly real GDP growth. The weaker euro will have hit relative prices but, in the absence of a sustained rebound in the currency, net volume trends should be generally positive during 2017.

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.