EMU: Merchandise Trade

Mon Oct 16 04:00:00 CDT 2017

Actual Previous Revised
Level E21.6B E18.6B E17.9B
Imports-M/M 0.4% 0.7% 1.3%
Imports-Y/Y 8.6% 8.2% 9.1%
Exports-M/M 2.5% -1.1%
Exports-Y/Y 6.8% 6.1%

The seasonally adjusted trade balance returned a E21.6 billion surplus in August, up from a smaller revised E17.9 billion in July. Unadjusted the black ink stood at E16.1 billion versus E17.5 billion in August 2016.

The headline improvement reflected a 2.5 percent monthly bounce in exports that easily more than offset a 0.4 percent advance in imports. This was the first increase in the former since May but still left the level of exports short of the record high reached that month. For imports this was their first back-to-back gain since December /January.

The August data put the average trade surplus in July/August just 0.3 percent above its mean level in the second quarter and probably points to another relatively small impact from total net exports on real GDP growth last quarter.

The underlying trend in the Eurozone surplus has been broadly flat for some time now but the moderately healthy headline data remain heavily dependent upon Germany. The region's largest member state saw an extra-EU surplus of some E117.1 billion over the first eight months of 2017, down just marginally from E117.1 billion over the same period of 2016. Little wonder therefore that calls for a more stimulative German fiscal policy remain as vocal as ever.

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.