US: International Trade in Goods

Mon Mar 28 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Balance $-62.5B $-64.4B to $-60.0B $-62.9B $-62.2B $-62.4B
Exports % change 2.0% -2.9% -3.2%
Imports % change 1.6% -1.5% -1.6%

Trade in goods popped up February, with exports up 2.0 percent and imports up 1.6 percent. The total goods deficit is an initial $62.9 billion. Exports of foods were especially strong in the month as were exports of consumer goods. Exports of capital goods, by far the largest component, inched higher. Pulling back exports was a 1.4 percent decline for industrial supplies that was tied in part to oil-based price weakness.

Imports were led by a 6.9 percent jump in consumer goods, one that hints at rising business expectations here at home. Imports of capital goods were also up and together with the gain for exports of capital goods are positives for global business investment. Imports of food were also up offsetting a decline for industrial supplies.

Cross-border activity has been a major negative for the global economy but February's goods data are positive. This report represents the goods portion of the monthly international trade report which will be posted a week from Tuesday.

Market Consensus Before Announcement
The international trade in goods is expected to widen slightly in February to $62.5 billion vs January's $63.7 billion (revised from $62.2 billion). This year's decrease in the dollar, amounting to several percentage points, should begin to help exports which, however, proved very weak in January. Exports of capital goods have been especially weak as have imports of capital goods, together pointing to lack of global business investment. Imports of consumer goods have been flat and pointing to slowing in domestic household demand.

The Census Bureau is now publishing an advance report on U.S. international trade in goods. The BEA will incorporate these data into its estimates of exports and imports for the advance GDP estimates. This is expected to reduce the size of revisions to GDP growth in the second estimates.

Changes in the levels of imports and exports, along with the difference between the two (the trade balance), are valuable gauges of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the dollar in the foreign exchange market.

Imports indicate demand for foreign goods here in the United States. Exports show foreign demand for U.S. goods. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies.

Market reaction to this report is complex. Typically, the smaller the trade deficit, the more bullish it is for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market. Like most economic indicators, the trade balance is subject to substantial monthly variability, especially when oil prices change.

It is also useful to examine the trend growth rates for exports and imports separately because they can deviate significantly. Trends in export activity reflect both the competitive position of American industry and the strength of domestic and foreign economic activity. U.S. exports will grow when: 1) U.S. product prices are lower than foreign product prices; 2) the value of the dollar is relatively weaker than that of foreign currencies; 3) foreign economies are growing rapidly.

Imports will increase when: 1) foreign product prices are lower than prices of domestically-produced goods; 2) the value of the dollar is stronger than that of other currencies; 3) domestic demand for goods and services is robust.