(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.
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
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'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 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.
dennis.moore@thomson.com
dem/ejp/dem/wash/jlw
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