Friday May 9, 02:57 PM
US March trade deficit falls 5.7 pct to $58.2 bln as economy slows UPDATE
(Updates with details, analyst comments)
WASHINGTON (Thomson Financial) - The US trade deficit displayed the effects of the slowing economy in March as weak domestic demand produced a drop in imports not seen since the last recession. That more than offset the first decline in exports since the beginning of 2007.
The Commerce Department reported a $58.2 bln deficit, down 5.7 pct from the revised $61.7 bln February trade gap.
Economists had been expecting a far smaller decline to $60.8 bln in a poll by Thomson IFR Markets.
The deficit on trade in goods was $68.6 billion in March, down from $72.1 bln in February, while the surplus on services remained virtually unchanged at $10.4 bln.
The driving factor in the surprise improvement was a 2.9% fall in imports to $206.7 bln. That was the biggest decline since December of 2001, a month after the last US recession ended.
The average price of an imported barrel of oil was up 6% to a record high $89.85, but that was offset by a 2.8% drop in the number of barrels imported.
Imports of oil and other petroleum products fell $3 bln in March, accounting for almost half the $6.1 dollar reduction in the monthly trade deficit.
There was also a $2.1 bln drop in auto imports, a $1.1 bln drop in consumer goods and an $841 mln fall in imports of capital goods.
US exports fell 1.7% to $148.5 bln, their biggest decline since a matching 1.7% fall in December of 2005. 'By region, export growth to most areas slowed sharply from the robust pace reported in February.' said John Ryding of Bear Stearns (NYSE: BSC - news) .
After adjusting for inflation, which implicitly includes the fall of the dollar, the real trade deficit for March was down 7.3% to $47.2 bln. Real (Frankfurt: BJU.F - news) exports dropped 5.4% and real imports fell 4.4%.
'While much ink had been spilled over the benefits of a weak dollar on international trade, there was no relief on overall exports,' said Ashraf Laidi of CMC Markets. 'In fact, as long as a falling dollar is accompanied by surging oil, the net effect is negative via rising oil imports.'
Civilian aircraft exports accounted for most of the export decline, falling $1.5 bln usd. The ups and downs of Boeing (NYSE: BA - news) 's sales are frequently the single biggest monthly change in US exports.
Auto exports were off $953 mln and consumer goods exports fell $731 mln. There was a commodity price-related offset from wheat and soybean exports, which together rose $484 mln.
'The weaker dollar against the euro, pound and Canadian dollar is boosting exports. However, the trade deficit remains stubbornly large, because imports of petroleum and from much of Asia are not much affected by those exchange rate movements,' said University of Maryland economist Peter Morici.
The US had its lowest trade deficit with China in two years, $16.1 bln, a 12.4 pct decline that depended on weaker US demand rather than any currency effects.
Because of the surprise trade deficit improvement, economists are raising their forecasts for the GDP revisions due out at the end of the month. In its first report April 30, the Commerce Department estimated a 0.6% annual growth rate for the first quarter. That included an assumed, not actual, figure for March's trade deficit
Stephen Gallagher at Societe Generale (Paris: FR0000130809 - news) said 'the narrower deficit for Q1 that was assumed by the Bureau of Economic Analysis in their advance Q1 GDP gives room for upside revisions. Indeed, our calculations suggest trade
revisions will add 0.2% to the growth rate.'
Ian Shepherdson of High Frequency Economics thinks the impact will be even greater. 'The trade contribution to first quarter growth will be revised up by about 0.5% points, lifting the GDP growth number to 1.1% from 0.6%, other things equal,' he said.
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