The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Investors Care
| Released on 6/10/08 For Apr 2008 | ||||||||||||
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Highlights
The U.S. trade balance in April widened sharply primarily due to a run up in oil prices. The overall U.S. trade gap widened to $60.9 billion from a revised $56.5 billion deficit in March and was marginally worse than the consensus forecast for a $59.5 billion deficit. In April, exports rebounded 3.3 percent but imports surged 4.5 percent. While the oil gap jumped, the nonoil gap was little changed. The oil trade gap grew to $34.5 billion from $30.2 billion in March while the nonoil deficit was unchanged at $36.1 billion in April. The jump in the oil gap was due to a spike in oil prices to $96.81 per barrel from $89.85 in March. Today's report confirms recent trends for higher imported inflation, a slowing in imports outside of oil, and a resumption of exports.
The gain in exports for April was broad-based but led by capital goods excluding autos. While a major part of this was aircraft, other subcomponents also were quite strong. Exports of consumer goods were robust along with automotive exports.
On the import side, oil clearly dominated. While there was a rebound in imports for capital goods, automotive, and consumer goods, only the capital goods component rebounded more than the March decline. Businesses finally have built in a forecast for a sluggish consumer sector.
Year-on-year, overall exports were up 19.2 percent in April while imports were up 13.5 percent.
Overall, today's report corroborates how strong imported inflation has become. Also, the outflow of dollars is keeping the U.S. economy sluggish in addition to higher gasoline prices strangling consumer budgets. The good news in the report is that exports remain strong and also that businesses are still optimistic enough looking forward to still be buying capital equipment. But the numbers are bad news for the dollar and bond prices. Equities also will likely not like the report because of the implied need for the Fed to worry more about inflation.
The U.S. international trade gap in March shrank sharply with imports declining across the board. The overall U.S. trade gap narrowed to $58.2 billion from a $61.7 billion deficit in February. In March, exports slipped 1.7 percent while imports dropped 2.9 percent. Both the oil and the nonoil gap grew smaller. The oil trade gap shrank to $35.2 billion from $37.4 billion the month before while the nonoil deficit narrowed to $36.1 billion in March from $37.3 billion in February. Given that the decline in March exports was largely due to a fall in the volatile aircraft shipments category, there is a good chance that exports will rebound in April. Consumer spending has been softening and that could keep imports weak. Now, even the barrels of imported oil may be impacted by a sharp cutback in driving by consumers although price effects could bump up nominal imports.
International trade balance Consensus Forecast for April 08: -$59.5 billion
Range: -$62.0 billion to -$56.3 billion
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Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar. |
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The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth. |
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