Seasonally adjusted the surplus on merchandise trade narrowed from June's marginally larger revised €18.8 billion to €15.9 billion in July. This was more than €2 billion less than the market consensus but still well above the €4.2 billion recorded a year ago. Unadjusted, the black ink stood at €16.4 billion versus €4.9 billion in July 2022.

The headline deterioration reflected a combination of weaker exports, which fell 0.9 percent on the month, and stronger imports, which increased 1.4 percent although the latter were still more than €19.3 billion short of last August's record high. Exports to other EU countries rose 0.5 percent while imports were up 2.9 percent. However, sales to non-EU states dropped 2.5 percent while imports were down 0.2 percent. Exports to Russia rose 2.2 on the month but dropped 31.3 percent on the year. On the same basis, imports were down 15.7 percent and 91.8 percent respectively.

Total net exports subtracted 0.6 percentage points from second quarter GDP growth but any negative impact should be much smaller in the current period. Today's update puts the German ECDI at minus 26 and the ECDI-P at minus 39, both measures showing overall economic activity lagging well behind market expectations.

Germany's goods balance is expected to narrow to an €18.4 billion surplus in July versus a surplus of €18.7 billion in June that was higher than expected and reflected a sharp drop in imports.

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.

Imports indicate demand for foreign goods and services in Germany. Exports show the demand for German goods in countries overseas. Given the size of the German 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.