U.S. Trade Deficit Unexpectedly Moves Lower

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.