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Economy in Brief

U.S. Trade Deficit Deeper in April, Prior Deficits Revised Shallower
by Tom Moeller June 10, 2008

The U.S. foreign trade deficit deepened to $60.9B in April. A $59.7B figure had been generally expected and March's deficit was revised shallower to $56.5B. Benchmark revisions to the seasonally adjusted figures back to 2005, and the not seasonally adjusted data to 2007, generally lowered the trade deficit. Exports were revised up slightly due to raised estimates for services.

U.S. exports rebounded 3.3% in April following their 1.9% March decline. At an annual rate exports during the last three months rose 15.0%. While that was improved from 13.0% growth last year, it actually is down from 32.3% growth last summer.

Goods exports surged 4.5% in April and in chained dollars they also jumped by 4.5% (11.3% y/y). That recovered virtually all of the 4.7% March decline. Chained dollar exports of nonauto consumer goods bounced back after March's decline and surged 6.1% (10.0% y/y). Exports of capital goods more than recovered the prior month's drop with a 5.5% (13.9% y/y) pop as exports of civilian aircraft (in nominal terms) surged 23.8% (33.0% y/y). That rise did not, however, recover declines during the prior several months. Nominal exports of computers also surged 13.9% (20.6% y/y).

Exports of services rose 0.9% (17.0% y/y) as travel exports rose 0.7% (19.5% y/y) and passenger fares rose 1.0% (25.4% y/y).

Higher oil prices again raised petroleum imports in April by 12.1%. Adjusted for those higher prices, however, petroleum imports rose just 3.9% (-4.2% y/y) and for all of this year so far the volume is down 2.6% from the annual peak for all of 2005. The average cost for a barrel of crude oil was $96.81 in April.

Month-to-month, a 3.5% rise in imports of nonpetroleum products recovered the prior month's decline. However, measured in chained 2000 dollars these imports rose only 2.6% after a 4.0% March drop and the y/y gain was barely positive following a reduced 2.6% increase in 2007. Also in chained dollars, imports of capital goods rose 2.7% (6.5% y/y), about equal to last year's full year growth. Chained imports of nonauto consumer goods did rise 1.6% but they were down 0.3% from last April. Real imports of automotive vehicles & parts surged 4.6% but they were down 3.0% from last year.

Services imports nudged up 0.9% (10.2% y/y). Travel imports increased 0.8% (11.1% y/y) and passenger fares increased 1.6% (19.9% y/y).

With China, the U.S. trade deficit in goods deteriorated sharply m/m to $20.3B. That was the deepest deficit since January, but so far this year the U.S. trade deficit with China averaged $18.7B per month versus a $21.2B monthly average last year. Exports to China rose in April 19.4% y/y and imports rose a moderate 6.9% which, due to slower U.S. economic growth, is down from an 11.7% increase last year. Imports from China rose 18.2% in 2006 and the annual gains exceeded 20% back to 2003.

Outstanding Issues in the Analysis of Inflation is yesterday's speech by Fed Chairman Ben S. Bernanke and it is available here.

Foreign Trade  April March Y/Y 2007 2006 2005
U.S. Trade Deficit $60.9B $56.5B $60.3B (4/07) $700.3 $753.3 $711.6B
Exports - Goods & Services 3.3% -1.9% 19.2% 13.0% 13.5% 10.6%
Imports - Goods & Services 4.5% -3.3% 13.5% 6.1% 10.8% 12.8%
  Petroleum 12.1% -7.5% 55.8% 9.4% 20.1% 39.6%
  Nonpetroleum Goods 3.5% -3.0% 6.0% 4.8% 9.1% 10.3%
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