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Economy in Brief

U.S. Trade Deficit Unexpectedly Moves Lower
by Tom Moeller March 11, 2010

Though the recession has ended, Americans' appetite for imported products remained under wraps last month. As a result, the U.S. foreign trade deficit improved to $37.3B from a little-revised $39.9B during December. The latest figure was lower than Consensus expectations for a deficit of $41.0B.

Perhaps showing the effects of the lower dollar imports fell 1.7% and reversed much of their December gain. Nevertheless, though monthly imports fell, the y/y growth accelerated to 11.9% with higher oil prices and the budding economic recovery. For the month, imports of petroleum products fell 3.1% but that factored little into an annual gain of roughly 50%. That reflected the near-doubling of energy prices which included crude oil rising to $73.89 per barrel. The price shock did not come, however, without a demand reaction. The quantity of petroleum imports fell 19.9% y/y following declines during the prior three years.

Outside of oil, imports did tick 2.0% lower during January as volumes slipped. However, versus last year non-oil imports rose 8.0% with the economic recovery following a 21.0%, recession-related decline for all of last year. In constant dollars, January real nonoil imports rose 7.0% as part of a nearly one-half y/y recovery in automotive vehicles & parts imports. Real nonauto consumer goods imports slipped for the second month but y/y they have grown 2.1% following a 10.8% decline during 2009. Capital goods imports also have recovered. Year-to-year growth of 7.2% spells recovery after a 18.0% drop last year. That came despite a 2.9% m/m January decline. Finally, services imports rose another 0.4% (4.1% y/y) after a sharp 1.4% December gain. U.S. travels abroad slipped 0.8% (-0.9% y/y) after a sharp December increase. Passenger fares slipped 0.4% (-6.7% y/y) but "other" transportation charges jumped 1.7% (4.9% y/y).

Continuing to reflect the competitive value of the dollar, nominal exports slipped just 0.3% m/m (+15.1% y/y) after the 3.4% jump during December. Though real merchandise exports fell 1.6% from December, the y/y gain of 14.2% is the strongest since early-2008. Real capital goods exports fell 2.6% (+4.3% y/y) and auto exports fell 5.7% (+61.8% y/y). Offsetting these declines was a 1.3% increase (17.7% y/y) in real exports of non-auto consumer goods. Exports of services ticked up 0.4% (6.4% y/y) for the third month of slight increase.

By country, the trade deficit with mainland China held roughly steady at $18.3B. That's still near its least since April and the deficit is down from its peak of $27.9B in October of 2008. Exports to China rose by nearly two-thirds y/y while imports rose just 1.8%. With Japan, the trade deficit improved to $3.3B from $4.3B one year earlier as exports rose 21.2% and imports fell 1.3%. With the European Union, the trade deficit narrowed to $2.8B, near its least since 1999 as exports rose 5.7% y/y and imports increased just 1.5%.

The international trade data can be found in Haver's USECON database. Detailed figures are available in the USINT database.

Okun's Law: Output & Unemployment from the Federal Reserve Bank of St. Louis is available here here.

Foreign Trade  January December November Y/Y 2009 2008 2007
U.S. Trade Deficit $37.3B $39.9B $36.1B $36.9B (1/09) $378.6B $695.9B $701.4B
 Exports - Goods & Services -0.3% 3.4% 0.9% 15.1% -14.9% 11.2% 13.2%
 Imports - Goods & Services -1.7 4.9 2.6 11.9 -23.4 7.6 6.0
  Petroleum -3.1 15.1 7.4 48.9 -44.1 37.0 9.4
  Nonpetroleum Goods -2.0 3.8 2.3 8.0 -21.0 1.5 4.8
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