U.S. Trade Deficit Continued to Narrow in February

• The foreign trade deficit in goods and services fell significantly.

• Imports fell sharply while exports slipped.

The U.S. trade deficit in goods and services narrowed to $39.93 billion in February from $45.48 billion in January, revised from $45.34 billion. It was the smallest deficit since September 2016. A $40.0 billion deficit had been expected in the Action Economics Forecast Survey. Exports slipped 0.4% both m/m and y/y after a 0.6% January easing. Imports fell 2.5% (-4.7% y/y) after a 1.7% decline.

The trade deficit in goods narrowed to $61.2 billion last month as goods exports rose 0.7% (-1.5% y/y). A 4.1% rise (-1.0% y/y) in auto exports was countered by a 4.2% decline (-10.2% y/y) in nonauto consumer goods exports. Imports of goods fell 2.4% (-5.8% y/y). Petroleum imports fell 1.3% (+0.3% y/y) as the price of crude oil fell to $57.24 per barrel. Nonpetroleum imports declined a greater 2.6% (-6.3% y/y). Capital goods imports fell 6.7% (-9.4% y/y) and nonauto consumer goods imports were off 2.1% (-8.4% y/y).

The services trade surplus eased to $21.28 billion and has been fairly stable for a year. A 2.4% decline (+1.6% y/y) in exports reflected a 7.0% fall (-8.3% y/y) in travel which was accompanied by zero change (+3.3% y/y) in charges for intellectual property. Imports of services declined 2.7% (-0.1% y/y) reflecting a 6.2% weakening (-4.9% y/y) in travel imports. The travel ban with China began on January 31, 2020. Intellectual property imports rose 0.3% (2.8% y/y) in February.

The goods trade deficit with China narrowed sharply to $19.7 billion (SA) in February. This compared to a record $43.1 billion deficit in October 2018. U.S. exports to China fell 18.4% y/y while imports fell 30.8% y/y. The trade deficit with the European Union narrowed to $12.6 billion (SA) in February, the smallest deficit in 12 months. Exports to the EU were off 23.2% y/y while imports weakened 15.8% y/y. The trade deficit with Japan narrowed to $5.1 billion (SA) as exports to Japan rose 7.5% y/y while imports from Japan fell 9.2% y/y.

The international trade data can be found in Haver's USECON database. Detailed figures on international trade are available in the USINT database. The expectations figures are from the Action Economics Forecast Survey, which is carried in AS1REPNA.

The Uncertainty Channel of the Coronavirus from the Federal Reserve Bank of San Francisco is available here https://www.frbsf.org/economic-research/files/el2020-07.pdf

Factory orders fell slightly (+0.1% y/y) during February following a 0.5% January decline. The Action Economics Forecast Survey expected a 0.2% gain. Durable goods orders jumped 1.2% (-0.0% y/y) following a 0.1% improvement. Machinery orders eased 0.6% (-2.6% y/y) but electrical machinery orders jumped 1.3% (3.2% y/y). Orders for computers & electronic products fell 0.7% (-0.2% y/y). Orders for nondurable products, which equal shipments, declined 1.2% (+0.3% y/y) as the value of petroleum refinery shipments fell 4.1% (-2.8% y/y), down sharply for the second straight month due to lower prices. Basic chemical shipments fell 0.4% (+1.8% y/y) but apparel shipments declined 2.4% (-0.9% y/y).

Shipments of durable goods rose 0.9% (-2.4% y/y) as transportation shipments increased 2.9% (-5.2% y/y). Shipments outside of the transportation sector fell 0.8% (-0.2% y/y). Machinery shipments were off 1.3% (-3.4% y/y) while electrical equipment & appliance shipments improved 1.6% (2.7% y/y). Transportation sector shipments strengthened 2.9% (-5.2% y/y) as nondefense aircraft shipments rebounded 17.5%. They remained down by one third y/y. Shipments of computers & electronic products rose 0.3% (-0.6% y/y).

Unfilled orders for manufactured products improved 0.1% (-1.7% y/y) after holding steady for two consecutive months. Transportation sector backlogs rose 0.2% (-2.3% y/y). Excluding transportation, unfilled orders eased 0.2% (-0.6% y/y). Machinery backlogs rose 0.1% (-3.5% y/y) while computer & electronic equipment order backlogs fell 0.1% (+0.6% y/y). Electronic equipment & appliance order backlogs rose 0.2% (6.7% y/y).

Factory sector inventories declined 0.4% (+1.6% y/y). Transportation equipment inventories rose 0.4% (13.0% y/y) but auto inventories fell 2.8% (+6.9% y/y). Excluding the transportation sector, inventories fell 0.6% (-1.1% y/y). Electrical equipment inventories were off 0.2% (+1.1% y/y) while computer & electronic product inventories slipped 0.8% (+0.2% y/y). Nondurable product inventories fell 0.9% (-1.5% y/y) as the value of petroleum refinery stockpiles dropped 6.1% (-4.8% y/y). Apparel inventories eased 0.6% (-3.3% y/y) and food product inventories rose slightly (1.0% y/y).

The factory sector figures are available in Haver's USECON database. The expectation figure is in the AS1REPNA database.

• Auto showrooms quiet as coronavirus flares up.

• Car sales weakened more than trucks.

The Autodata Corporation reported that sales of light vehicles during March declined 0.2% (+2.0% y/y) to 17.04 million (SAAR) from 17.07 million in January, revised from 17.05 million. During the last three months, sales averaged 17.00 million units. Sales have been easing since the 2016 sales peak of 17.55 million units.

Sales of light trucks were off 0.1% (+6.6% y/y) at 12.56 million units. Purchases of domestically-made light trucks fell 0.8% (+7.2% y/y) to 9.92 million units following January's 4.4% rise. Sales of imported light trucks improved 2.7% (4.3% y/y) to 2.64 million units after January's 0.4% improvement.

Trucks' share of the U.S. light vehicle market reached a record 73.7%, up from a low of 48.8% during all of 2012.

Auto sales weakened 0.2% (-8.9% y/y) to 4.48 million units. That remained below a peak level of 7.71 million unit sales during all of 2014. Purchases of domestically-produced cars fell 3.3% (-12.7% y/y) to 3.22 million units and added to January's decline. Sales of imported cars strengthened 7.7% (2.4% y/y) to 1.26 million units after rising 0.9% in January.

Imports' share of the U.S. vehicle market rose last month to 22.9% and has been moving sideways for two years. Imports' share of the passenger car market jumped to 28.1%, its highest level in four months. Imports share of the light truck market edged higher to 21.0% and remained up from the 12.0% low in January 2015.

U.S. vehicle sales figures can be found in Haver's USECON database. Additional detail by manufacturer is in the INDUSTRY database.