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Economy in Brief

U.S. Trade Deficit Deepens With Higher Oil Prices & Economic Recovery
by Tom Moeller May 12, 2010

After stabilizing a bit for a few months, the U.S. foreign trade deficit broke from its range and deepened in March. The deficit of $40.4B compared to a little-revised $39.4B during February. The latest figure roughly matched Consensus expectations for a deficit of $40.0B. Nevertheless, the latest deficit was the deepest since December of 2008.

Both imports and exports were strong during March. The 3.1% increase in total imports reflected a 10.0% increase (72.4% y/y) in imports of petroleum products as crude oil prices rose m/m to $74.32 per barrel. The economic recovery in the U.S. also caused the quantity of petroleum imports to jump 7.4% m/m, even though the level remains down 2.5% y/y following declines during the prior several years.

Non-oil imports again reflected the economic recovery with a 2.6% gain which was the seventh solid increase in the last nine months. These gains followed a 17.7% decline for all of last year. The increase has been led by imports of automotive vehicles & parts which surged by nearly two-thirds y/y. Real nonauto consumer goods imports rose another 1.1% m/m (9.1% y/y) and capital goods imports jumped 1.2% m/m (16.7% y/y). Finally, services imports slipped 1.3% (+9.1% y/y). U.S. travels abroad increased 1.1% (4.5% y/y) while passenger fares surged 4.8% (5.6% y/y). "Other" transportation services imports jumped for the seventh consecutive month, posting a 3.8% increase (18.1% y/y).

Nominal exports jumped 3.2% (20.4% y/y) due to a 3.4% surge (16.9% y/y) in real merchandise exports. That was the strongest y/y gain since 1997. Real exports of non-auto consumer goods led the strength with a 5.7% jump (11.0% y/y). Real capital goods exports followed with a 1.2% gain (10.8% y/y) and auto exports nudged up by 0.4% (53.5% y/y). Exports of services rose 0.9% (11.9% y/y) with a 12.8% y/y gain in travel.

By country, the trade deficit with mainland China held roughly stable at $16.9B, roughly half its peak of $27.9B in October of 2008. Trade with China surged as exports jumped by roughly 33% y/y and imports rose by a lesser 14.7%. With Japan, the trade deficit deepened to $5.2B as imports surged by roughly 50%, due to the U.S. economic recovery, and exports rose 14.6% y/y. With the European Union, the trade deficit increased to $7.1B as exports rose 6.0% y/y but imports from Europe surged 15.8%.

Foreign Trade  March February January Y/Y 2009 2008 2007
U.S. Trade Deficit $40.4B $39.4B $37.0B $28.8B (3/09) $378.6B $695.9B $701.4B
 Exports - Goods & Services (m/m) 3.2% 0.3% -0.2% 20.4% -14.9% 11.2% 13.2%
 Imports - Goods & Services 3.1 1.6 -1.8 24.2 -23.4 7.6 6.0
  Petroleum 10.0 1.9 -3.6 72.4 -44.1 37.0 9.4
  Nonpetroleum Goods 2.6 1.1 -1.8 20.4 -21.0 1.5 4.8
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