FR: Merchandise Trade

Wed Feb 07 01:45:00 CST 2018

Actual Previous Revised
Level E-3.47B E-5.69B E-5.62B

The seasonally adjusted merchandise trade balance saw a E3.47 billion deficit in December. This was down sharply from a marginally smaller revised E5.62 billion in November but still made for calendar year red ink of E62.5 billion, a near-27 percent increase versus 2016 and the most since 2012.

The monthly headline improvement, which saw the shortfall hit its smallest mark since June 2016, reflected a 5.9 percent jump in exports, largely due to sharply stronger Airbus deliveries. This easily more than offset a modest 0.4 percent increase in imports.

Higher oil prices will have significantly inflated the trade deficit in 2017 but the underlying performance was still disappointing and in sharp contrast to the huge surpluses that continue to be recorded over the border in Germany. In part this is attributable to poor French competitiveness but the rising imbalance will also ensure that pressure will remain on the German government for a more expansionary fiscal policy.

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.