Italy’s exports and imports both dropped on the month with exports dropping faster. As a result, the trade gap widened. But the gap has improved from its worst level at end of 2008. True, the deficit has expanded again from it best level in May of 2009, but both exports and imports are on the mend. The export drop this month was particularly large and therefore it is hard to put in context; it will take several more months to figure out if this is a new trend of sorts, or an oddity.

One problem is that Germany, too, had reported a sharp and unexpected drop in exports. So the Italian drop may have something to it. Even so it could be that the same rogue factor affected both of them, it could be a coincidence, or it could be a fundamental weakening in exports. It will take time to tell

Because of the relatively sharp drop this month, -15.9% for exports Vs -8.8% for imports, the Yr/Yr trends are probably distorted. But both export and import growth are down sharply across major category components (see the table, at the bottom).

While all nations are banking on trade to become an engine of growth, US demand seems to be slow in starting and most industrialized economies are having a hard time getting into gear, too. It is in this environment in which it is hard to see why up to this point exports have responded so well in the cycle. One man’s export is another’s import and ultimately is linked to domestic demand which remains globally challenged: that is the part that is hard to figure out. Whose export demands have been strong and will they stay that way?