U.S. Trade Deficit Stable M/M But Sharply Deeper Since Last Year

The latest and revised U.S. foreign trade figures paint the same picture as earlier. An April deficit of $40.3B, stable since February, followed deterioration from its shallowest last May. The latest figure roughly matched Consensus expectations for a deficit of $41.0B.

The deficit's deterioration since last year reflects the U.S. economic recovery. Non-oil imports slipped 0.7% in April but it was the first monthly decline in nearly one year. The 21.1% y/y gain during the last twelve months reflects a two-thirds increase in imports of automotive vehicles & parts. Real nonauto consumer goods imports rose 4.0% y/y while capital goods imports jumped by nearly one-quarter with the strength in business investment. Finally, services imports have risen 6.8% y/y. U.S. travels abroad fell 0.7% y/y while passenger fares surged 15.0% y/y. "Other" transportation services imports jumped 7.7% y/y. Imports of petroleum products slipped marginally in April but were up by two-thirds from last year with the surge in prices.

Nominal exports slipped 0.7% during April following their slightly-revised 3.8% jump during March. Year-to-year, however, exports have risen a strong 19.9% with the dollar's lower value. The monthly dip reflected a 5.3% drop in nonauto consumer goods exports (+10.3% y/y) and a 7.6% drop in food & beverages (+4.2% y/y). These were offset by a 1.9% increase (50.3% y/y) in industrial supplies exports and a 1.4% gain (+57.2% y/y) in autos. In addition, exports of services rose 0.2% (8.0% y/y) as passenger fares were strong.

By country, the trade deficit with mainland China deepened to $19.3B, its deepest since December. Trade with China surged as exports jumped by one-quarter y/y and imports rose by a lesser 18.2%. The trade deficit with Japan eased to $4.8B but imports rose by roughly one-third y/y with the U.S. economic recovery and exports rose 17.2% y/y. With the European Union the trade deficit eased to $5.7B as exports rose 7.0% y/y and imports rose about the same.

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

Activity in U.S. credit markets experienced a relative recovery in Q1, as total liabilities contracted a mere $10.3 billion, SAAR.  This was a sharp improvement from the $841.3 billion rate of shrinkage in Q4 2009 and the year's average reduction of $610.6 billion.  These debt aggregates come from the Federal Reserve's flow-of-funds statistics reported today, June 10, for Q1 2010.

By sector, the biggest change was in nonfinancial corporations, which raised debt at a $289 billion annual rate, turning around from the net paydown of $57 billion in Q4.  Companies had the largest amount of net commercial paper issuance since Q3 of 2008 and the largest volume of net new corporate bonds in a year. The federal government, as might be expected, increased its debt issuance from $956 billion in Q4 to $1,446 billion in Q1, both seasonally adjusted annual rates. 

Households, on the other hand, continued paying down debt.  Their home mortgage debt fell at a $390 billion rate and consumer credit at a $39 billion rate.  With some partial offsets in other borrowing, their total credit usage dropped at a $330 billion pace.  This contributed, as today's press reports have noted, to a further gain in their net worth to $54.6 trillion on March 31 from $53.5 trillion at year-end. 

he financial sector extends its contraction.  The debt of commercial banks, finance companies and specialized lenders fell at a $1,336 billion rate in Q1, a fifth consecutive quarterly drop, albeit the smallest.  The largest was $2,293 billion in Q2 2009.  Commercial banks and issuers of asset-backed securities (ABS) had the largest paydowns of their own debt among various financial institutions, and both of those, along with money market funds, also continued to reduce their provision of credit to their own customers.

The rest of the world borrowed modestly in U.S. markets in Q1, $112 billion on balance.  As investors, these foreign participants in U.S. financing provided $663 billion in total funds, more than accounted for by acquisition of Treasury securities:  official holdings increased at a $451 billion annual rate and private foreign investors took on $339 billion worth.  There were obviously liquidations of several other asset positions, especially including commercial paper and private holdings of agency and GSE-backed securities.

The flow-of-funds data are in Haver's FFUNDS database, and the series on Mortgage Equity Withdrawal are in USECON.