The seasonally adjusted merchandise trade balance returned a surplus of E18.4 billion in December, down from a minimally larger revised E21.8 billion in November. Unadjusted the black ink weighed in at E18.7 billion, little different from the E18.4 billion posted a year ago.
The adjusted year-end reading was the smallest since November 2014 and reflected a 3.3 percent monthly fall in exports and flat imports. The decline in the former unwound much of the previous period's 3.9 percent bounce and was the first decrease in three months. Compared with a year ago, exports now show an unadjusted rise of 6.3 percent while imports are up 7.4 percent.
December's setback puts the seasonally adjusted surplus at E60.8 billion over the fourth quarter as a whole, a fall of 1.6 percent versus the July-September period. This will probably equate with little impact from total net exports on fourth quarter real GDP growth (flash data due next Tuesday). However, for the calendar year, the surplus was E252.9 billion, up from E244.3 billion in 2015 and a new record high. This will not sit well with other Eurozone countries.
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.
Imports indicate demand for foreign goods and services in Germany. Exports show the demand for German goods in countries overseas. Given the size of the German 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.