EMU: Merchandise Trade

Fri Apr 13 04:00:00 CDT 2018

Actual Previous Revised
Level E21.0B E19.9B E20.2B
Imports-M/M -3.1% 1.1% 1.0%
Imports-Y/Y 1.5% 6.3% 5.8%
Exports-M/M -2.3% -0.7%
Exports-Y/Y 3.0% 9.1% 9.0%

The seasonally adjusted trade balance was in a E21.0 billion surplus in February, up from a slightly larger revised E20.2 billion in January. Unadjusted the black ink stood at E18.9 billion, a E2.8 billion increase from a year ago.

The monthly expansion in the adjusted surplus masked falls in both sides of the balance sheet. Hence, exports declined 2.3 percent, their second successive fall, to a 3-month low of E186.1 billion while imports were off a sharper 3.1 percent to hit their lowest level since last October. Unadjusted annual growth of exports now stands at 3.0 percent, twice the comparable figure for imports.

At E20.6 billion, the average surplus for the first two months of the year stands 1.1 percent below its fourth quarter mean when total net exports added some 0.4 percentage points to quarterly real GDP growth. Notwithstanding changes in relative prices, today's report points to a much smaller contribution last quarter and so increases the likelihood of a slowdown in Eurozone economic 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.