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Economy in Brief

Trade Deficit Eases in UK, Surplus Increases in Canada, but Energy May Be Starting to Restrain Demand for Non-Energy Imports
by Carol Stone May 11, 2005

The surprising reduction in the US trade deficit for March begs for comparison with trade data reported today by other major countries. We've highlighted here the role of energy in two oil-producing nations, the UK and Canada, along with the US. In the US, the petroleum deficit continued to widen, but modestly, while the non-petroleum deficit fell sharply in the month, as described by Tom Moeller in the homepage commentary for today.

In the UK, the overall trade deficit decreased to £4.4 billion in March from £5.1 billion in February. The non-oil deficit also decreased, but just slightly, reflecting a 1.8% rise in non-oil exports after two successive monthly declines. The oil surplus in the UK is marginal, and in some months, oil even runs a small deficit. The non-oil deficit had widened fairly consistently from 1997 through the middle of last year and has since begun to diminish gradually, as import growth has tended to slow.

Canada's trade balance was C$4.235 billion in March, up from C$4.155 billion in February. The energy surplus is drifting down a little, with the March value, C$3.4 billion, off from the 2004 average of C$3.7 billion. Exports of energy products have flattened in the last six month, but energy imports are trending upward, as seen in the second graph. The surplus in non-energy trade has fallen more distinctly with a modest slowing of those exports.

In both the US and the UK, non-energy imports have recently turned down. For the US, this is just a one-month development and could easily be reversed, but in the UK, March was the third month. Possibly the weight of energy on these economies is starting to restrain other purchasing from abroad. This is an important development to monitor.

Monthly Average
Millions of Local Currency,
Seasonally Adjusted
Mar 2005 Feb 2005 Mar 2004
2004 2003 2002
UK: Balance on Goods -4,412 -5,037 -4,108 -4,829 -3,972 -3,890
Balance on Oil 384 44 193 163 344 478
Balance ex Oil -4,796 -5,081 -4,519 -4,992 -4,316 -4,368
Canada: Balance on Goods 4,235 4,155 5,584 5,602 4,848 4,768
Balance on Energy 3,386 3,053 3,164 3,693 3,406 2,738
Balance ex Energy 849 102 2,420 1,909 1,442 2,030
US: Balance on Goods -57,171 -63,538 -50,026 -54,234 -44,362 -39,022
Balance on Petroleum -16,992 -16,343 -13,013 -13,653 -10,034 -7,764
Balance ex Petroleum -41,179 -47,195 -37,013 -40,582 -34,329 -31,258
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