EMU: Merchandise Trade

Fri Dec 15 04:00:00 CST 2017

Actual Previous Revised
Level E19.0B E25.0B E24.5B
Imports-M/M 0.6% -1.2% -0.9%
Imports-Y/Y 10.1% 5.1% 5.3%
Exports-M/M -2.4% 1.1%
Exports-Y/Y 8.8% 5.6% 5.5%

The seasonally adjusted trade balance was E19.0 billion in the black in October, a marked decline from a downwardly revised E25.5 billion in September. Unadjusted, the surplus was E18.9 billion, a small decrease from the E19.2 billion posted in October 2016.

The headline deterioration mainly reflected a 2.4 percent monthly fall in exports to a 3-month low of E180.6 billion. This was comfortably their worst performance of the year to date. By contrast, imports were up 0.6 percent although this failed to fully reverse September's 0.9 percent drop. Despite the adjusted monthly fall, unadjusted annual export growth still rose from 5.5 percent to 8.8 percent while the import rate climbed to 10.1 percent from 5.3 percent.

The October surplus was more than 9 percent short of its average level in the third quarter. The monthly data are very erratic but this could warn of a negative contribution from total net exports to fourth quarter real GDP growth.

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.