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Daily Global Commentary

Imports Help to Hold Down Trade Deficit during March

Sun, May 11 2008, 18:57 GMT
by Asha Bangalore

Northern Trust

Imports Help to Hold Down Trade Deficit during March

The trade deficit of the U.S. economy improved to $58.2 billion in March from $61.7 billion in February. Imports and exports declined in March, with a larger drop in imports accounting for the improvement in the trade deficit. The extent of the improvement in the trade deficit in March is larger than what was assumed in the first quarter advance estimate of GDP, implying that an upward revision of GDP is likely, holding other things constant. Revisions, if any, for retail sales and estimates of inventories for March should give a more complete picture on March 13.

Exports of goods and services fell 1.7% in March after a 1.8% increase in February. 57.4% of the drop in exports was due to a decline in aircraft exports, a rebound in April should not be surprising. Exports of autos (-9.1%) and non-auto consumer goods (-5.5%) were the other major declining components.

The 2.9% drop in imports of goods and services reflects weak growth in the U.S. economy. Autos (35% of total decline), crude oil (43.4% of total ) and non-auto consumer goods (19% of total decline) were the major items responsible for the drop in decline in imports. Inflation adjusted imports of goods dropped 5.4%, while inflation adjusted exports of goods dropped 4.4% in March. Given the projections of a weak U.S. economy in the months ahead, declines in imports of goods and services in the months ahead should not be surprising. The quantity of energy-related petroleum products (Energy-related petroleum products include the crude oil, petroleum preparations and liquefied propane and butane gas.) declined 1.1% in March after 12.8% drop in February. The trade balance was the widest on record in August 2006 (-$67.606 billion), but later narrowed to $56.729 billion in August 2007 and has moved around these readings since then.

The trade deficit widened vis-à-vis Europe ($6.189 billion vs. $6.003 billion in February), Japan ($7.5 billion vs. $6.8 billion in February), Canada ($6.482 billion vs. $6.450 billion in February), and Mexico ($5.9 billion vs. $5.5 billion in February) but narrowed vis-à-vis China ($16.007 billion vs. $18.3 billion in February)

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Published on  Sun, May 11 2008, 19:01 GMT

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