Italy's merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy's National Institute of Statistics, the deficit was €554 million, seasonally adjusted, nearly the same as December's €609 million. Exports eased €168 million, while imports were off €223 million. Longer trends in exports and imports indicate that adverse developments on both sides of the trade accounts generated the deficit.

Exports drifted downward from late 2001 until early last spring. This slack was reflected in shipments to customers elsewhere in the EU and also to non-EU areas; see the accompanying graph. By type of product, all three major categories were flat: consumer goods, investment goods and intermediate products. The latter two have rebounded in recent months, while consumer goods exports remain sluggish.

Imports didn't expand in that 2001-2003 period, but they did stay steady as exports declined, and they have run up rapidly since last April. The surge in energy prices is an obvious driver of this growth, but notably, consumer, investment and intermediate goods categories have all participated, nearly equally. It will be interesting in coming months to see if the continuing pressure on energy prices will eventually eat into demand for other goods and services, in Italy, but also among Italy's trading partners.