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 3/9/07 For Jan 2007 | ||||||||||||
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Highlights
The U.S. trade deficit narrowed to a slightly better-than-expected level of $59.1 billion in January, down 3.8 percent vs. December's $61.5 billion. In a good combination, exports were strong in the month, rising 1.1 percent, while imports dipped, down 0.5 percent.
The deficit narrowed despite a 4.7 percent rise in the petroleum gap. Excluding petroleum, the deficit narrowed an impressive 7.6 percent. Strength was centered in exports of capital goods, up $1.0 billion with civilian aircraft up $0.5 billion. An especially good sign in the data was a decrease in imports of consumer goods, down a sharp $1.4 billion in the month.
By country, the gap with China widened to $21.3 billion vs. $19.0 billion in December and it also widened with OPEC, to $9.3 billion vs. $7.9 billion. But the gap narrowed with the EU to $6.5 billion vs. $9.0 billion and with Japan, at $6.5 billion and down $1.0 billion in the month.
Slowing domestic growth, highlighted by February's payroll headline which came out at the same time as the trade data, point to slowing domestic demand for consumer goods. Strong global markets, centered in Asia, point at the same to demand for our exports. The nation's trade deficit is still a problem as is our budget deficit, which however is narrowing. But December's TIC data showed a big step back in foreign demand for our securities. Watch for January's TIC data on Thursday for the next big clue on the funding outlook for the nation's deficits. Though overshadowed by the jobs report, today's trade data is a plus for all U.S. securities.
The U.S. international trade gap widened to $61.2 billion in December from $58.1 billion deficit in November. The increase in the trade deficit was primarily due to a jump in imports - primarily oil and with the continued upward creep in oil prices, we are likely to see a repeat in January. Markets should also be watching the export number to see if foreign support of U.S. manufacturing is holding up. Exports rose 0.6 percent in December, following a 1.1 percent jump in November.
International trade balance Consensus Forecast for January 07: -$59.8 billion
Range: -$61.0 billion to -$58.6 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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