FR: Merchandise Trade

Fri Apr 06 01:45:00 CDT 2018

Actual Previous Revised
Level E-5.19B E-5.56B E-5.42B

The seasonally adjusted merchandise trade deficit narrowed from a slightly smaller revised E5.42 billion in January to E5.19 billion in February.

However, the modest improvement masked shrinkage in both sides of the balance sheet with a 1.4 percent monthly fall in imports to a 6-month low outweighing a 0.9 percent drop in exports. The second successive decrease in the latter was largely due to weakness in chemicals and electrical equipment which had shown solid growth in recent months. Imports were hit by a decrease in aeronautical supplies.

Today's data leave the average January/February gap more than 13 percent larger than the fourth quarter mean. This makes it all the more likely that any contribution from total net exports to real GDP growth this quarter will fall well short of the 0.7 percentage point boost provided in October-December. With household spending sluggish, the signs are that the French economy could see a significant slowdown at the start of 2018.

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.