Trade Deficit Is Down for a 2nd Month
For the first time in more than two years, the U.S. trade deficit has declined for two months in a row, the Commerce Department said. The main reasons: record exports and a big drop in the country’s foreign oil bill.
In another report released Friday, consumer optimism buckled in May to its lowest level since Hurricane Katrina, hit by $3-a-gallon gasoline, rising mortgage interest rates and a souring political climate.
The trade gap narrowed to $62 billion in March, the smallest deficit in seven months, the Commerce Department reported Friday.
It was down from a $65.6-billion imbalance in February and an all-time high of $68.6 billion in January.
The figures marked the first consecutive monthly improvements in the deficit since October-November 2003 and offered hope that the country’s trade deficits, which have set records for four straight years, might be on the verge of improving.
But private economists, who had expected the March deficit to rise to $67 billion, cautioned that the change would not come overnight. They said the monthly deficit numbers were likely to grow again in coming months, reflecting the recent surge in oil prices, before steady improvements start at the end of this year.
“Oil prices are likely to remain high and move up during the summer. But after that, we may see some sustained declines in the trade deficit,” said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.
Through the first three months of this year, the trade deficit was at an annual rate of $785 billion, up 8.4% from last year’s record high of $723.6 billion.
The politically charged deficit with China rose by 12.5% in March to $15.6 billion even though U.S. exports to China hit an all-time high, led by a big jump in sales of commercial airplanes.
The March deficit, the lowest monthly imbalance since August’s gap of $58.5 billion, reflected a 1.9% rise in U.S. exports of goods and services, which hit a record of $114.7 billion.
The increase in exports was attributed to stronger overseas growth, which has boosted demand for American exports, and a weaker dollar versus other currencies, which makes U.S. goods cheaper and more competitive on foreign markets.
In March, some of the biggest export gains were recorded for electric generators, industrial machinery, computers and farm products including corn and soybeans.
Imports of goods and services fell for a second straight month, dropping by 0.8% to $176.7 billion. Imports of foreign cars fell by $751 million, and petroleum imports dropped an even larger $2.1 billion to $22.5 billion, the lowest level since July, as crude oil prices dropped.
However, the oil bill is expected to rise again in coming months, reflecting crude oil prices that surpassed $75 a barrel, a record, in late April.
Separately, the University of Michigan’s closely watched sentiment survey slumped to 79 in May from April’s final 87.4, far below the median Wall Street forecast of 86.1.
The report stirred worries that many Americans would stay away from the shopping malls over the next few months as they spent more to fill up their cars -- although the link between consumer sentiment and actual spending is often tenuous.
“If sentiment stays at this level -- it might even decline further -- you should expect a serious slowing in second-quarter and third-quarter consumption,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
