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 6/8/07 For Apr 2007 | ||||||||||||
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Highlights
The U.S. trade deficit narrowed sharply in April to $58.5 billion from $62.4 billion in March. The April figure was well below the consensus expectation for a $63.3 billion gap. Imports fell 1.9 percent while exports edged up 0.2 percent. The import improvement was primarily outside of petroleum. Weakness was led by declines in imports of consumer goods and autos. Imports of non-auto capital goods also declined.
The merchandise trade gap (Census basis) narrowed to $64.6 billion from a revised $67.9 billion deficit in March. The goods gap excluding petroleum shrank to $42.3 billion from $45.5 billion in March.
On the import side, merchandise imports fell $3.3 billion. Declines were led by consumer goods, down $1.5 billion, and automotive, down $1.0 billion. While industrial supplies rose $0.3 billion, the crude oil subcomponent fell $0.3 billion.
On the export side, merchandise exports were flat. Gains were led by foods, feeds, & beverages and by industrial supplies which rose $0.7 billion and $0.4 billion, respectively. Exports of capital goods excluding autos declined by $0.7 billion.
The oil trade deficit narrowed incrementally in April to $22.3 billion from $22.4 billion in March. Crude oil prices in April continued upward, rising to $57.28 per barrel from $53.00 per barrel in March.
On a bilateral basis, the deficit with China widened from $17.2 billion in March to $19.4 billion in April. The goods deficit with Canada rose from $5.8 billion in March to $5.8 billion in April. The goods deficit with the European Union widened from $7.7 billion in March to $9.0 billion in April. Country balances are not seasonally adjusted.
Today's report will be favorable for the dollar and that will likely nudge interest rates down. The impact on equities is uncertain as the lower deficit will add to second quarter GDP growth but the decline in imports suggests some expect weaker U.S. demand in coming quarters. However, imports have a long lag from purchase to delivery and the dip in imports may merely be having misjudged economic strength from months ago.
The U.S. international trade gap widened in March to $63.9 billion from a $57.9 billion shortfall in February. Imports rebounded 4.5 percent, largely reflecting an increase in the price of oil. Exports also rebounded, up 1.8 percent. We can expect oil prices to play a key role in swings in imports but markets will be watching to see if the uptrend in exports continues - a key support for U.S. manufacturing.
International trade balance Consensus Forecast for April 07: -$63.3 billion
Range: -$65.5 billion to -$62.0 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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