EMU: Merchandise Trade

Mon Jan 15 04:00:00 CST 2018

Actual Previous Revised
Level E22.5B E19.0B
Imports-M/M 1.6% 0.6% 0.7%
Imports-Y/Y 7.3% 10.1% 10.3%
Exports-M/M 3.7% -2.4% -2.1%
Exports-Y/Y 7.7% 8.8% 8.9%

The seasonally adjusted trade balance was in a E22.5 billion surplus in November, up from October's unrevised E19.0 billion and the second largest of 2017 to date. Unadjusted, the black ink stood at E26.3 billion, a E2.5 billion increase from a year ago.

The jump in the adjusted headline reflected a 3.4 percent monthly bounce in exports to a new record high of E187.1 billion. This was their third advance in the last four months and comfortably outpaced a 1.6 percent gain in imports which, at E164.6 billion, were only just short of their E165.8 billion peak posted in May. Annual export growth now stands at 7.7 percent, just 0.4 percentage points above the import rate.

Total net exports had a neutral effect on quarterly real GDP growth in July-September and on the basis of the goods data available so far, look likely to have had only a small impact in the final quarter of the year. However, euro strength could become an issue should the currency's solid start to 2018 be sustained.

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.