FR: Merchandise Trade

February 7, 2017 01:45 CST

Actual Previous Revised
Level E-3.42B E-4.38B E-4.37B

The seasonally adjusted trade balance was E3.42 billion in the red in December following a minimally smaller revised E4.37 billion in November.

The decline, which left the deficit at its lowest level since June, reflected a 4.0 percent monthly bounce in exports to a new record high of E40.42 billion. However, this was essentially attributable to a doubling in the usual rate of aircraft deliveries and so provides a misleadingly bullish impression of the underlying trend. Imports were up 1.4 percent, largely due to stronger purchases of aerospace and refined petroleum products, agricultural products and metals.

Despite December's improvement, the fourth quarter shortfall still stands at E13.02 billion, up from E12.54 billion in the July-September period and the worst merchandise trade performance since the third quarter of 2014. The provisional fourth quarter national accounts showed total net exports adding just 0.1 percentage points to quarterly GDP growth. Over 2016 as a whole, the impact was minus 0.9 percentage points, up from a 0.3 percentage point hit in 2015. Worries about the capacity of French exporters to handle a stronger euro will not go away any time soon.

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.