Highlights
The seasonally adjusted merchandise trade balance defied expectations in no small way in September with a sharp widening in the surplus to E6.8B from a larger revised E2.2B in August.
The marked improvement reflected a 5.5 percent monthly jump in exports that easily eclipsed a 1.1 percent advance in imports. Even so, annual growth in the former was still strongly negative at minus 18.0 percent while imports were down an even steeper 24.0 percent on the year.
The September data left the third quarter balance in surplus to the tune of E14.6B, a dramatic gain over the second quarter black ink (E3.1B). Similarly, the non-adjusted data for the fist eight months of the year show a marked improvement in a number of key bilateral positions. In particular, the deficit with China shrank to E58.4B from E72.7B during the same period of last year while the gap with Russia narrowed from E34.3B to E17.6B.
However, over the same period, net trade with the U.S. deteriorated with the bilateral surplus declining from E3.5B to E20.9B.
With domestic demand in the Eurozone still struggling to sustain any upturn, EMU policymakers will be especially keen that U.S. dollar weakness is not protracted. To this end, expect further comments from Eurozone politicians promoting the virtues of a strong Dollar.
Definition Merchandise trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.
Why Investor's Care 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 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 imbalance can create greater 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.