The seasonally adjusted merchandise trade balance was in an €11.3 billion deficit in January, down from a smaller adjusted €13.4 billion in December and slightly less than the market consensus. Unadjusted, the red ink stood at a €30.6 billion deficit, little changed from the €30.2 billion posted a year ago.

However, the monthly improvement masked falls in both exports and imports. The former declined a further 1.1 percent after a 2.8 percent slide at year-end, while the latter decreased 1.8 percent to extend the unbroken sequence of losses that began back in September. Imports are now at their lowest level since March 2022. Unadjusted annual growth of exports was 11.0 percent, widening the gap with its import counterpart to 1.3 percentage points. Overall EU exports to Russia fell 45.1 percent from January 2022 while imports from Russia were down 56.3 percent.

Today's update puts both the Eurozone's ECDI and ECDI-P at minus 23, signalling a moderate degree of underperformance by economic activity in general.

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.