A year ago no emerging market would have wished to trade places with Spain, but with the market fretting about wide current account deficits the remarkable recovery in Spain's Trade Balance will be generating some envy this morning.

The June data showed a Trade Deficit of -€106 mln, which compares to a -€2,700 deficit in June 2012. The 12 month ma of the deficit has narrowed to -€1495 mln, its smallest level since July 1998. This compares to a reading of -€3409 in June 2012, -€4355 in June 2010 and -€8686 in June 2008 (see chart).

Although in part this improvement has been caused by slowing imports the major cause has been a very robust performance by Spain's export sector. July exports were no exception, with a total of €20.8 bln exported an increase of 10.5% YoY. This represents a record performance for July data, and the trailing 12 month ma has also reached a new all time high of €19.28 bln, which compares to a level of €18.19 bln a year go.

As we have explained before this sharp improvement in the trade balance not only benefits corporate earnings of exporters but has been a key factor in re-liquefying the financial system. Compared to 3 years ago €34.3 bln less has been required to meet Spain's 12 month trade deficit, a meaningful reduction that looks set to continue going forwards.