U.S. trade deficit narrows in March, net exports likely contributed less to GDP growth in Q1

U.S. trade deficit narrowed in the month of March, coming in a bit better than expectations. Deficit narrowed to USD 49 billion. The miss relative to the projection came from the services side of the report: the trade surplus in services increased to USD 20.5 billion. The goods side of the report was in line with the advance goods trade balance report. From an imports and exports point of view, the deficit was boosted mainly by a fall in imports, which fell 1.8 percent sequentially, while exports rose 2 percent sequentially.

Delving into details, the fall in imports was widespread throughout categories. The sharpest falls were seen in food & beverage, capital goods and consumer goods. This is consistent with the weak patch in personal spending seen in the first quarter. In the meantime, total goods exports rose 2.7 percent sequentially, driven by strong rises in all categories, except automotives. Services exports rose for the third consecutive month. As the boos from fiscal stimulus rises, imports are expected to pick up, and that is likely to lead to wider trade deficits in the months ahead, noted Barclays in a research report.

“Taken together, the data this morning suggest a slightly lower contribution from net exports to GDP growth than what was reported in the advance GDP release. We revised lower our tracking estimate a tenth, to 2.2 percent”, added Barclays.

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