The seasonally adjusted merchandise trade surplus narrowed from a marginally larger revised €27.6 billion in January to a surprisingly small, but still sizeable, €21.4 billion in February. Unadjusted, the surplus stood at €24.7 billion, a marked increase on the €18.4 billion posted a year ago.

The monthly headline deterioration reflected a combination of weaker exports and stronger imports. The former fell 2.0 percent after a 6.3 percent jump at the start of the year while the latter climbed 3.2 percent following a 3.3 percent gain. The slide in exports trimmed unadjusted yearly growth from 1.6 percent to minus 1.2 percent but the increase in imports lifted their 12-month rate from minus 7.5 percent to minus 6.7 percent, an 11-month high.

Despite February's decline, the trade balance remains in a very healthy surplus and potentially on course to make a positive contribution to first quarter GDP growth. Today's reports put the German RPI at minus 4 and the RPI-P at 8. Overall economic activity is running broadly in line with market expectations.

February's goods balance is expected to narrow to a €26.0 billion surplus versus a larger-than-expected surplus of €27.5 billion in a positive January report that saw strong gains for imports and even stronger gains for exports.

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.