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 5/10/07 For Mar 2007 | ||||||||||||
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Highlights
The U.S. trade deficit widened in March to a worse-than-expected $63.9 billion from a $57.9 billion shortfall in February. The consensus had expected a $60.1 billion gap. Imports rebounded 4.5 percent, largely reflecting an increase in the price of oil. Exports also rebounded 1.8 percent.
The merchandise trade gap (Census basis) widened to $67.6 billion from a revised $62.8 billion deficit in February. The goods gap excluding petroleum grew to a deficit of $45.5 billion from $44.3 billion in February.
On the import side, merchandise imports rose $6.9 billion. Increases were led by industrial supplies which jumped $5.0 billion and included oil imports.
On the export side, merchandise exports rebounded $2.1 billion. Gains were led by industrial supplies and automotive vehicles which rose $1.3 billion and $0.6 billion, respectively.
The oil trade deficit expanded in March to $22.1 billion from $18.5 billion in February. Crude oil prices in March rebounded to $53.00 per barrel from $50.71 per barrel in February.
On a bilateral basis, the deficit China narrowed from $18.4 billion in February to $17.2 billion in March. The goods deficit with Canada rose from $4.7 billion in February to $5.7 billion in March. The goods deficit with the European Union widened from $6.4 billion in February to $7.7 billion in March.
Today's report is a clear reminder of the impact of higher oil prices. The wider gap will put downward pressure on the dollar and upward pressure on rates. Equities could go either way-the higher gap means heavier demand but also sticky inflation problems.
The U.S. international trade gap narrowed to $58.4 billion in February from $58.9 billion in January. 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. Given the run up in oil prices during March, we should expect a worsening in the trade gap. However, exports of capital goods are affected by Boeing aircraft shipments and we could see a rebound in exports in that category.
International trade balance Consensus Forecast for March 07: -$60.1 billion
Range: -$62.0 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. |
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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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