US quarterly trade gap grows; exports, imports decline after March surge

THE US trade deficit widened slightly in April, though the more striking news was that both export and import volumes fell sharply, says IHS Global Insight Chief US economist Nigel Gault.

The trade deficit widened to US$40.3 billion in April from a downwardly revised $40 billion in March. In value terms, exports fell 0.7 per cent while imports fell 0.4 per cent.

"These declines should be viewed as corrections after very sharp increases in March," he said. "Goods export volumes fell 2.5 per cent after rising 3.8 per cent, while import volumes fell 1.5 per cent after rising 3.3 per cent. Export and import trends are still pointing higher, although the pace of growth is slowing after the big bounce-back in the second half of 2009."

Mr Gault said foreign trade would likely be a drag on growth in the second quarter of .50-1.0 of a percentage point, as it was in the first quarter. Both exports and imports should rise, he said, but imports are outpacing exports as the US recovery pulls in imported finished goods and materials.

"In coming months, exports will face headwinds from the strengthening of the dollar against the euro. We still expect GDP growth to come in above four per cent in the second quarter, a temporary peak before the economy slows below three per cent in the second half under the weight of fading stimulus, slower global growth, and a stronger dollar, Mr Gault said.

Since prices were rising, volumes weakened more than values. Goods export volumes fell 2.5 per cent, while goods import volumes fell 1.5 per cent. In both cases, the April falls only partly offset big increases in March.

"The petroleum deficit narrowed by $500 million as oil import volumes fell, he said, adding that "the trend for both exports and imports still points upwards, but the pace of growth is slowing".
(source:www.schednet.com)