FR: Merchandise Trade

Thu Sep 07 01:45:00 CDT 2017

Actual Previous Revised
Level E-5.97B E-4.66B E-4.88B

The seasonally adjusted trade deficit stood at E5.97 billion in July, a significant widening from the slightly larger revised E4.88 billion posted in June and the most red ink since February.

The deterioration was wholly attributable to stronger imports which rose 3.0 percent on the month to a near-record high. Aeronautics and chemicals were mainly to blame but there were gains too in industrial machinery and intermediate products. Exports were up a more modest 0.5 percent.

Total net exports boosted quarterly economic growth by fully 0.6 percentage points in the second quarter but July's jump in the trade deficit warns that any positive contribution this quarter will be significantly less. This means that if last quarter's 0.5 percent GDP rate is to be matched, domestic demand will have to fill the hole and this will almost certainly require a stronger performance by household spending.

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.