Econoday Report: International Trade April 9, 2009

International Trade

Released on 4/9/2009 8:30:00 AM For February, 2009

	Prior	Consensus	Consensus Range	Actual
Trade Balance Level	$-36.0 B	$-36.5 B	$-38.5 B to $-33.1 B	$-26.0 B

Highlights
The U.S. trade deficit in February unexpectedly plunged on U.S. import demand falling over a cliff. The overall U.S. trade gap shrank to $26.0 billion from a revised $36.2 billion shortfall the month before. The February figure was far smaller than the market forecast for a $36.5 billion gap. Exports actually rebounded 1.6 percent while imports plummeted 5.1 percent. The improvement in the overall deficit was due primarily to a drop in nonoil imports. The February nonoil deficit fell to $22.2 billion from $31.3 billion in January. The oil deficit also shrank but not as much to $13.7 billion from $14.8 billion in January.

The drop in imports was widespread but led by declines in industrial supplies and capital goods excluding autos. Consumer goods and autos also fell. The rise in exports was led by increases for consumer goods and automotive.

The oil deficit was nudged down by a 15.1 percent fall in barrels imported and also by slippage in the price of imported oil. The average price of imported oil edged down to $39.22 per barrel in February from $39.81 per barrel the previous month.

Year-on-year, overall exports slipped to down 16.9 percent in February from down 16.5 percent in January while imports worsened to down 28.8 percent from down 22.8 percent the previous month.

The February trade report will cause economists to recalculate their estimates for first quarter GDP growth (higher) but the big worry is how much consumers and businesses are cutting back-even for imported goods. The latest trade report emphasizes how much consumers and businesses have pulled back on spending. But for today, markets have forgotten yesterday's gloomy FOMC minutes and are focusing on Wells Fargo's positive earnings report.

Market Consensus Before Announcement
The U.S. international trade gap in January shrank again as exports and imports competed to see which could fall the fastest. The overall U.S. trade deficit narrowed to $36.0 billion from $39.9 billion shortfall the month before. In January, exports fell 5.7 percent while imports dropped 6.7 percent. For February, rising oil prices are likely to boost imports while weak demand abroad will keep exports down. Look for some reversal in the February trade gap.

Definition
International trade is composed of merchandise (tangible goods) and services. It is available nationally by export, import and trade balance. Merchandise trade is available by export, import and trade balance for six principal end-use commodity categories and for more than one hundred principal Standard International Trade Classification (SITC) system commodity groupings. Data are also available for 36 countries and geographic regions. Detailed information is reported on oil and motor vehicle imports. Services trade is available by export, import and trade balance for seven principal end-use categories. Why Investors Care

Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar.

Data Source: Haver Analytics

The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth.

Data Source: Haver Analytics

2009 Release Schedule

Released On: 1/13 2/11 3/13 4/9 5/12 6/10 7/10 8/12 9/10 10/9 11/13 12/10

Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct