Nation's Trade Gap Narrows In March

The nation's trade gap narrowed in March but, unfortunately, is not a positive for the economic outlook. The gap came in at $40.4 billion in March vs a revised $47.0 billion in February and largely reflects a downgrade for imports which fell 3.6 percent in the month vs the prior month's 1.3 percent rise. Contraction in imports, though a positive for the gap, is however a negative indication for domestic demand, especially in this report as consumer goods show unusual weakness. And indications on foreign demand are also negative with exports, despite the positive effects of this year's depreciation in the dollar, slipping 0.9 percent vs February's 1.1 percent rise.

Imports of consumer goods fell a very steep $5.1 billion in the month followed, in yet another major negative, by core capital goods which fell $1.6 billion. The former points to weak consumer demand and the latter points to weakness in business expectations. Oil was not a factor on the import side, averaging $27.68 per barrel vs February's $27.48 and making for a total petroleum deficit of $3.0 billion vs February's $3.5 billion deficit.

Weakness on the export side is also concentrated in consumer goods, down $1.6 billion in the month, and includes a separate $0.7 billion decline for autos. Industrial supplies are also down. One positive is a $1.3 billion rise in core capital goods which, however, follows a long string of declines. A solid positive is a further gain for service exports, up 0.5 percent in the month and generally reflecting demand for the nation's technical and managerial expertise.

The nation's gap with China, reflecting the decline in imported consumer goods, narrowed very sharply, to $20.9 billion in March from February's $28.1 billion. The narrowing with China offset widening gaps with the EU, at $13.1 billion, and with Mexico, at $5.4 billion, and also with Japan, at $6.7 billion.

Trade data are always very revealing, in this case pointing unfortunately to declining cross-border demand and showing little benefit, at least so far, from this year's decline in the dollar.

Recent History Of This Indicator:
The nation's trade deficit is expected to narrow sharply in March, to a consensus $41.4 billion vs February's $47.1 billion. Advanced trade data on goods showed a big decline for imports, which points at weak domestic demand, and another decline for exports which points at weak foreign demand.