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Economy in Brief

U.S. Trade Deficit Narrowed Unexpectedly in March
by Tom Moeller May 9, 2008

The U.S. foreign trade deficit narrowed unexpectedly to $58.2B in March from $61.7B in February, revised slightly shallower. Consensus expectations had been for a March deficit of $61.2B. So far this year the deficit has averaged $59.6B, slightly deeper than during all of last year.

The weaker U.S. economy, along with the sagging value of the dollar continued to weigh on imports. A 2.9% month to month decline reflected a 2.7% drop in imports of nonpetroleum products. Measured in chained 2000 dollars these imports fell 3.6% pulling the year to year change down to -3.8%. Also in chained dollars, imports of capital goods reversed all of the February rise with a 2.2% (+3.0% y/y) decline. The 3.2% shortfall in chained imports of nonauto consumer goods was the third drop in four months and it left them down 4.7% y/y. Real imports of automotive vehicles & parts fell 9.4% (-10.3% y/y).

Higher oil prices and the weaker U.S. economy together worked to lower the quantity of energy-related petroleum imports by 1.0% (-14.1% y/y) after a 12.8% February drop. The nominal value of petroleum product imports rose 5.7% (41.9% y/y) as crude oil prices rose 6.0% (69.5% y/y) to an average $89.85 per barrel.

U.S. exports in March gave back their February rise with a 1.7% decline, but the relative strength of foreign economies lifted the year to year gain to 15.5%. But that firm trend has weakened recently. Goods exports fell 2.7% in March but in chained dollars they fell by 4.4% (+6.0% y/y). Chained dollar exports of nonauto consumer goods fell 5.7% (+3.3% y/y) after a 1.2% February decline. Exports of industrial supplies & materials also fell a sharp 4.5% (+10.2% y/y). Exports of capital goods were down for the fourth month in the last five, by 3.2% (+6.8% y/y). Exports of civilian aircraft recently have wobbled. In March they fell 31.9% (+6.1% y/y) for the fourth decline in the last five months. Exports of computers also fell a sharp 10.5% (+16.2 y/y). Finally, chained dollar exports of nonauto consumer goods fell 5.7% (+3.3% y/y) while real automotive exports fell 9.2% (-4.5% y/y).

The U.S. trade deficit in goods with China improved sharply m/m to $16.1B, the smallest deficit in two years. Imports from China fell 7.0% (-1.3% y/y) for the fourth sharp decline in five months while March exports to China, conversely, rose 10.0% (16.0% y/y). The trade deficit with Europe deepened to $74.5B as exports rose 4.4% y/y and imports rose 2.6%.

Exports of services slipped 0.1% (+15.9% y/y) as travel exports fell 0.1% (+23.0% y/y) and passenger fares rose 1.8% (23.3% y/y).

Services imports fell 0.2% (+12.1% y/y). Travel imports nudged up 0.2% (6.4% y/y) and passenger fares fell 0.4% (+16.9% y/y).

Macroeconomic interdependence and the international role of the dollar from the Federal Reserve Bank of New York can be found here

Foreign Trade  March February Y/Y 2007 2006 2005
U.S. Trade Deficit $58.2B $61.7B $63.0B (3/07) $708.5 $758.5 $714.4B
Exports - Goods & Services -1.7% 1.8% 15.5% 12.6% 12.7% 10.9%
Imports - Goods & Services -2.9% 2.6% 7.9% 6.0% 10.4% 12.9%
  Petroleum -5.9% -5.9% 40.9% 9.5% 20.1% 39.6%
  Nonpetroleum Goods -2.7% 5.0% 0.9% 4.6% 9.1% 10.3%
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