Imports and Exports both fell in today’s International Trade Report.
Imports declined more than exports, signaling weakening consumer demand, but the overall shrinking of the trade deficit gave a small lift to GDP estimates for the first quarter.
Trade activity slowed sharply in March though the deficit narrowed, down a sharp 9.5 percent to $56.9 billion vs February’s $62.9 billion. Exports fell 1.7 percent to $116.7 billion with consumer goods showing a steep decline together with wide declines for industrial supplies, autos, and foods. A positive, however, is a 1.5 percent uptick in capital goods exports, one that follows a smaller gain in February and hints at resiliency for global business investment. But the import side of the report points at declining domestic demand with consumer goods down a very steep 9.1 percent. Capital goods are also weak, down 3.6 percent. Cross-border activity has been a major negative for the global economy and March’s goods data point to continuing trouble though they will, however, give a lift to first-quarter GDP. This report represents the goods portion of the monthly international trade report which will be posted next Wednesday.
The trade deficit in goods is expected to narrow to $62.6 billion in March vs a $64.7 billion deficit in February. Though wide, the deficit does show gains for exports which, though a negative for GDP, are otherwise a big plus for the economy and specifically for factory jobs. Exports of goods rose 1.4 percent in February and 2.0 percent in January and a similar gain for March would suggest that this year’s depreciation in the dollar is beginning to give exporters some lift. The import side offers clues on domestic demand which, though rising in February, did fall back in January.
Here’s the explanation from GDPNow.
Latest forecast: 0.6 percent — April 27, 2016
The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6 percent on April 27, up from 0.4 percent on April 26. After this morning’s advance report on international trade in goods from the U.S. Census Bureau, the forecast of the contribution of net exports to first-quarter real GDP growth increased from -0.68 percentage points to -0.45 percentage points.
Exports add to GDP while imports subtract. The net effect of today’s report was +0.2% to first quarter GDP. However, consumer goods plunged 9.1%, an indication of waning consumer demand.
Mike “Mish” Shedlock