U.S. Trade Deficit Declines As Imports Slump

America’s trade deficit shrank more than forecast in March as imports fell in percentage terms by the most in seven years and outpaced a decline in shipments overseas.

The gap narrowed 13.9 percent to $40.4 billion, the smallest since February 2015, the Commerce Department reported Wednesday. The median forecast in a Bloomberg survey called for a $41.2 billion deficit.

Imported merchandise declined 3.6 percent, the most since February 2009, as American companies strived to get inventories in line with weaker first-quarter demand. At the same time, shipments overseas fell for the fifth time in six months amid soft global sales.

“The most troubling thing was in the consumer sector — we’re not exactly sure what’s going on there and whether it’s sort of a one-off effect,” in terms of the slump in imports, Jay Bryson, global economist at Wells Fargo Securities LLC, in Charlotte, North Carolina, said before the report.

Still, “I think you’re going to see import growth outpace export growth as you go forward, and therefore trade will continue to be a modest headwind to growth in the U.S.,” he said.

Estimates in the Bloomberg survey ranged from trade gaps of $40 billion to $48.7 billion after a previously reported $47.1 billion deficit a month earlier.

After eliminating the effects of price fluctuations, which generates the numbers used to calculate gross domestic product, the trade deficit narrowed to $57.4 billion in March from $63.2 billion a month earlier. March’s real trade gap was the smallest since July.

First Quarter

The Commerce Department’s initial estimate showed trade subtracted 0.34 percentage point from first-quarter GDP. The economy expanded an annualized 0.5 percent. Trade has contributed to U.S. growth in just one quarter out of the last six.

Imports decreased to $217.1 billion in March, the smallest since February 2011, from $225.1 billion a month earlier. The slump in purchases from overseas was broad-based and included capital equipment, consumer goods and industrial supplies such as oil.

America’s petroleum deficit narrowed to $3 billion, the smallest since February 1999.

Exports decreased 0.9 percent to $176.6 billion in March from $178.2 billion the prior month. Middling overseas demand hobbled orders for consumer goods, which declined to a three-year low. Exports of industrial supplies were the weakest since February 2010.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell