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International Trade Balance: February 2011

Published Apr 12, 2011 3:28 PM by The Maritime Executive

 

Trade Deficit Narrows Slightly as Volumes Ease

-Gregory Daco, U.S. Senior Economist, IHS Global Insight

Bottom Line

  • The trade deficit narrowed slightly to $45.8 billion in February from an upwardly revised deficit of $47.0 billion in January.
  • Exports and imports volumes moderated from their January levels, but imports fell faster.
  • The oil import bill fell $1.6 billion as the drop of 7.5% in oil import volumes was partly offset by higher oil prices.
  • Consumer goods imports rose 1.2%, excluding pharmaceuticals.
  • Auto and capital goods imports moderated after their January surges.
  • The trade deficit with China narrowed $4.4 billion to $18.8 billion.
  • This report suggests that foreign trade will represent a small drag on growth in the first quarter of the year.

Outlook

The trade deficit fell to $45.8 billion in February as imports fell more rapidly than exports. This month showed a slow-down from the January surges in export and import volumes.

On the export front, all major categories receded with the largest (expected) pull-back going to autos (after a very strong month in January). Industrial goods exports also fell strongly as losses in energy related products were in part offset by higher non-monetary gold exports (which is not included in the GDP calculation). Capital goods exports also eased as losses semiconductors and industrial engines were in part offset by soaring civilian aircrafts exports (up 39.4%).

Total imports decreased 1.7% as the goods imports volumes dropped 3.0%. The oil import bill edged down 4.4% as the drop in volumes was offset by stronger prices. Within non-petroleum imports, consumer goods were the notable exception, gaining 1.2% when factoring out pharmaceuticals (up 28.9%). Autos and capital goods (including telecommunications equipment and computers) eased from the January surge, down 10.9% and 5.1%, respectively.

Overall, this trade report does not bode well for the first quarter real GDP estimate. IHS Global Insight now expects foreign trade to be small drag on real GDP growth in the first quarter of 2011. For the year, exports should continue to progress under the momentum of strong emerging markets growth and a weak U.S. dollar, thereby offsetting a rebound in imports pulled in by solid private sector spending and some inventory rebuilding.