EMU: Merchandise Trade

Mon Mar 19 05:00:00 CDT 2018

Actual Previous Revised
Level E19.9B E23.8B E23.9B
Imports-M/M 1.1% 0.9% 0.7%
Imports-Y/Y 6.3% 2.5% 2.8%
Exports-M/M -0.7% 1.7%
Exports-Y/Y 9.1% 1.0% 0.9%

The seasonally adjusted trade balance was in a E19.9 billion surplus in January, down from a minimally larger revised 23.9 billion in December. Unadjusted, the black ink stood at E3.3 billion, a marked improvement on the E1.4 billion deficit posted a year ago.

The headline deterioration in the adjusted balance reflected a 0.7 percent monthly fall in exports, their first decline since last October, compounded by a 1.1 percent rise in imports, their fourth advance in a row. Unadjusted annual growth of the former now stands at 9.1 percent and of the latter at 6.3 percent.

January's surplus was nearly 5 percent below its average level in the fourth quarter when total net exports contributed some 0.4 percentage points to the 0.6 percent quarterly rise in real GDP. Exports alone provided a 0.9 percentage point boost. While early days yet, the chances are net foreign trade will be less positive this quarter which means that domestic demand will have to fill the gap if economic growth is not to slow.

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.