The seasonally adjusted merchandise trade balance ended 2023 in a healthy surplus. At €13.0 billion, the December black ink was down from November's upwardly revised €15.1 billion but still the second largest of the year. The monthly deterioration reflected a 0.8 percent drop in exports together with flat imports. Unadjusted, the balance was in a €16.8 billion surplus, a marked improvement on an €8.5 billion deficit in December 2022.

Today's report leaves a broadly flat trend for exports and a modestly declining path for imports. However, both exports and imports remain well below their respective levels in December 2022. Hence unadjusted annual growth of the former now stands at minus 8.8 percent and of the latter, at minus 14.8 percent. Both sides of the balance sheet continue to be negatively impacted by trade with Russia. Over 2023 as a whole, EU exports to Russia were down 30.4 percent and imports fully 75.0 percent.

The December update means that the Eurozone recorded a small €65.9 million surplus in 2023. This compares with a €332.2 billion shortfall in 2022 and mainly reflects a marked price-led decline in the deficit on energy.

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.