The seasonally adjusted merchandise trade balance deteriorated in May. At €12.3 billion, the surplus was well short of a downwardly revised €18.5 billion in April and the smallest since last October. The decline was driven by exports which fell 2.6 percent on the month to touch a 5-month low. Imports dipped just 0.1 percent. However, unadjusted, the black ink stood at €13.9 billion, a marked improvement on the €0.4 billion deficit posted in May last year.

The monthly drop in the adjusted balance leaves a worsening trend with exports at best only flat and imports rising modestly. That said, the balance remains well in the black and the unadjusted data show yearly export growth of minus 0.5 percent versus minus 6.4 percent for their import counterpart.

Both sides of the balance sheet remain impacted by the war in Ukraine. Hence, for the EU as a whole, exports to Russia were down 16.3 percent on the year while imports were off 18.3 percent.

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.