The trade gap narrowed today and that is a good thing.
Last month the trade gap was -47.1 billion, revised to -47.0 billion. This month the trade gap narrowed to -40.4 billion a bit better than the Bloomberg Econoday consensus estimate of -41.4 billion.
However, consumer goods plunged by $5.1 billion and that has economists concerned about weakening sales across the board.
The analysts are not pleased with the report.
Highlights
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.
Imports down more than exports will help GDP, but autos are looking very weak all around. The hype over autos yesterday (see US Auto Sales Back on Track? Another Record Year?) seems more than a bit overdone.
I will have more on autos in a bit.
Mike “Mish” Shedlock
If you want to sell something in America………then, you have to make it in America.
Thank you. I’ll pick up my Nobel Prize in Economics next time I’m in Sweden and learn how to speak Arabic.
If you want to sell something in Peoria, you have to make it in Peoria.
I just beat you to the Nobel….
Heck! Obama didn’t and can’t even do that!
But he bows very fluently in Arabic!
Maybe steel tariffs kicking in?
Mish,
The US has largely been able to sell its debt by running large trade deficits with countries such as China. If imports slow, that suggests that countries like China will continue to weaken choking off demand for US treasuries. This would leave the fed as the last significant buyer of US debt. This does not bode well for the extend and pretend CB Ponzi scheme.
It is a mathematical certainty that
1. US trade deficit with Asia is behind China’s accumulation of treasuries
2. If trade deficit falls so will need to finance the deficit
The US is less of a Ponzi scheme than China, Japan, and even Europe
Mish
Does the balance of trade really matter? There is no correlation between the health of economies and the balance of trade. Angola, Botswana and Azerbaijan all of large trade surpluses but I wouldn’t want to live there.
What’s really important to understand is what exactly is driving a given trade surplus or deficit. For example, foreign direct investment coming into your country counts as imports. Your country could be importing absolutely no goods, services, or commodities but still have a trade deficit because foreign capital is coming in to invest in building new manufacturing facilities.
Discussions regarding balance of trade statistics are completely meaningless without the context of what is driving them.
Correct.
“Trade Deficits”, are just arbitrary entities devoid of any practical meaning these days. Back when trade was eventually settled in Gold, if the reserving had gotten a bit more fractional than officially admitted, it could mean trouble ahead. But nowadays, it’s just another mindless piece of junk to rile up the dolts with. So they look elsewhere when you strip them of their rights and livelihoods.
In addition, the balance of trade between two towns 100 miles apart, doesn’t suddenly become more relevant, because some hack draws an arbitrary national border between them.
Trade occurs between individuals. Not “nations.” Nor any other arbitrary aggregate. Some guy in America buys an ounce of weed from some dude in Mexico. “America” doesn’t buy weed from “Mexico” in the abstract.
in my Business ( Lux One off items Built to order $100-300k a unit ) I can state that my customers ( the top 5% ) are delaying ordering. Orders YTD are running 1/5 last years run Rate.
It’s a very small sample for Sure, but these Guys are hunkering down.
Sorry to hear that. However it is across the board…….
If economists want shoppers to shop, all they have to do is allow CPI prices to go down. Shoppers love sales.
All nations can’t simultaneously raise domestic CPI prices to “spur exports”. Half the nations need to allow their CPI prices to become affordable so that shoppers somewhere can afford to buy what is being produced.
DryShips is a defacto trade index. DryShips is rumored bankrupt soon. When your index falls of the edge of the Earth it does give pause.
Never fear!
Today’s government economists will just declare the earth is flat after all!
Do you mean Baltic Dry Index?
It’s last cycle bottomed in March 2016, and the next bottom is expected in 2019.