The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Investors Care
| Released on 4/13/07 For Feb 2007 | ||||||||||||
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Highlights
The nation's trade deficit narrowed 0.7 percent in February to a better-than-expected $58.4 billion vs. $58.9 billion in January. The consensus had expected a gap of $60.3 billion. Imports fell 1.7 percent reflecting a drop in the price of oil along with a sharp drop in volume. Exports also fell, down an unusually sharp 2.2 percent reflecting a month-to-month downturn in exports of capital goods as well as a dip in exports of consumer goods.
The merchandise trade gap (Census basis) narrowed to $64.5 billion from a revised $65.2 billion deficit in January. The goods gap excluding petroleum widened to a shortfall of $44.8 billion from $41.8 billion in January.
On the import side, merchandise imports fell $3.30 billion. Decreases were led by industrial supplies which declined $3.87 billion. Oil imports fell $2.49 billion. Imports of consumer goods posted a $1.09 billion increase.
On the export side, merchandise exports fell $2.61 billion. Declines were led by capital goods which fell $2.16 billion.
The oil trade deficit narrowed in February to $18.3 billion from $21.8 billion in January. Crude oil prices in February declined to $50.71 per barrel from $52.23 per barrel in January.
On a bilateral basis, the deficit with China narrowed to $18.4 billion in February from $21.3 billion in January on an unadjusted basis. The gap with Japan widened to $7.0 billion from $6.5 billion.
Today's report looks good on the surface with the gap narrowing. However, the narrowing was due to oil prices effects. What is of concern is the decline in capital goods exports. This confirms the softness in manufacturing. A closer look at the numbers "should" cause concern for equities and dampen interest rates. But the markets probably are not digging into the detail.
The U.S. international trade gap narrowed to $59.1 billion in January from December's $61.5 billion. Exports posted a 1.1 percent increase, while imports declined 0.5 percent. The decline in imports was primarily due to a sharp drop in oil prices from December to January. In contrast, oil prices were up significantly in February and we will likely see a worsening in imports and in the deficit. However, markets should also focus on whether the uptrend in exports continues and provides support for U.S. manufacturing.
International trade balance Consensus Forecast for February 07: -$60.3 billion
Range: -$62.5 billion to -$58.5 billion
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Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar. |
![[Chart]](chart_1.gif)
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The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth. |
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