EMU: Merchandise Trade

Fri May 18 04:00:00 CDT 2018

Actual Previous Revised
Level E21.2B E21.0B E20.9B
Imports-M/M 0.7% -3.1% -3.4%
Imports-Y/Y -2.5% 1.5% 1.1%
Exports-M/M 0.8% -2.3% -2.5%
Exports-Y/Y -2.9% 3.0% 2.8%

Seasonally adjusted, the trade balance was in a E21.2 billion surplus in March, up from a marginally smaller revised E20.9 billion in February and a 3-month high. Unadjusted, the black ink stood at E26.9 billion, a near-6 percent decline versus a year ago.

The modest improvement in the adjusted surplus came courtesy of exports which, with a 0.8 percent monthly rise, just outpaced a 0.7 percent increase in imports. However, the recovery in the former came nowhere close to reversing the cumulative 3.5 percent fall in January/February while imports only dented the previous period's 3.4 percent nosedive. Unadjusted annual growth of exports now stands at minus 2.9 percent and of imports at minus 2.5 percent.

The March data make for a E62.1 billion surplus in the first quarter. This compares with E61.6 billion in the fourth quarter of 2017 and suggests that total net exports struggled to match the 0.4 percentage point boost to GDP growth that they provided at the end of last year. Relative euro strength the currency's trade-weighted index is around 4 percent stronger than a year ago was probably a factor although it seems to have had little impact on the German performance. In any event, in the midst of weakening economic growth most Eurozone governments (and the ECB) will not be unhappy with the slide in the unit seen since the middle of April.

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.