French Trade Deficit Deepens As Exports Slow

The French trade deficit slipped deeper into the red ink zone in March at €14.4 billion compared to €12.5 billion in February. The deficit has eroded gradually over the year with a 12-month average of €10.3 billion, a six-month average of €12.2 billion and a three-month average of €12.5 billion. These numbers compare to a trade deficit of €7.9 billion over the previous twelve months- a clear on-going deterioration as the chart documents.

French exports in March fell by 0.1% after falling by 3.6% in February; these compared to imports that rose by 3.4% in March after rising by 0.5% in February. Clearly trade flows are working in the past couple of months to make the deficit larger.

Sequential growth rates show more stability for exports than for imports. But that's little solace since the export growth rates are below the growth rates for imports even though the import growth rates are decaying somewhat.

Exports grow at a pace of 14.3% over three months, 15.7% over six months and 15.1% over 12 months. These are growth rates annualized over the various periods. They compare to imports where the three-month growth rate is 19.2% which is down from 39.7% over six months and lower than the 26.5% pace over 12 months. But clearly, over each of these horizons, imports are growing faster than exports and therefore each of the horizons shows pressure on the trade deficit to get larger.

Export details for France show that food, beverages & tobacco exports have been accelerating slightly from 12.6% over 12 months up to a 25.6% pace over three months. However, transportation equipment exports that fell by 0.1% over 12 months is falling at a 13.1% pace over three months. For other exports, the growth rate is hardly changed, sitting at 19.4% over 12 months and then logging a pace of 19.7% over three months.

For imports, food, beverages & tobacco imports rise by 15.4% over 12 months and by 12.2% over three months. Transportation equipment show imports falling by 0.4% over 12 months and then falling at a much more rapid 29.1% pace over three months. For other imports, the 12-month pace is 33.2%, nearly the same as the 30.7% pace over three months.

France has just completed its set of national elections and returned Emmanuel Macron to office. It continues to face problems with the spreading virus, and like other countries in Europe, it has the war in Ukraine at its doorstep threatening its economy.

The European Central Bank appears with ready to begin to take a more restrictive stance against the excessive inflation that has developed in the euro area. This will create another headwind for the French economy although, at the moment, French imports are growing very strongly and that would appear to be a good signal about French domestic demand. However, with central banks around the world poised to take a more restrictive stance to fight what is clearly a round of global inflation, the outlook for growth globally must be more suspect.