US trade shortfall narrows sharply in March, capital goods exports higher

America's shortfall in trade with the rest of the world narrowed sharply in March on the back of a sharp jump in aircraft and agricultural commodities exports.

Goods imports also fell sharply versus February, retreating by 1.6% month-on-month in real terms, whereas exports rose by 2.9%.

The total US foreign trade deficit in goods and services dropped from -$57.7bn for February to -$49.0bn in March, according to the Department of Commerce.

That was substantially less than the consensus forecast for -$56.0bn of red ink.

Driving the improvement was a $7.5bn reduction in the goods deficit as exports of civilian aircraft grew by $1.9bn, alongside a $1bn rise in overseas sales of foods, feeds, and beverages.

The US surplus in trade on services meanwhile rose by $1.3bn to $20.5bn.

Year-to-date, the total trade gap had widened by $25.5bn or by 18.5% versus the same quarter one year ago.

Commenting on the figures, Andrew Hunter at Capital Economics pointed out that while capital goods exports were "solid" in March, the 1.8% drop in [nominal] imports was not "particularly reassuring", although it came on the heels of a run of "very strong" increases at the end of 2017.

In any case, in the first quarter real goods exports appeared to have grown by less than the 6.1% annualised gain the government had included in its preliminary estimate of first quarter US gross domestic product, he said.

Hence, the Department of Commerce's assumption that net trade had contributed 0.2 percentage points to the rate of GDP growth during the first three months of 2018 would likely be revised away.

"The data imply that net trade was broadly neutral for GDP growth in the first quarter and we expect that to continue over the rest of the year.

"[...] Accordingly, assuming the Trump administration backs down from its protectionist threats, the outlook for exports is also fairly bright."

In March, the country's trade deficit in goods stood at $35.4bn with China, $12.4bn with the European Union, $7.0bn with Mexico, $5.9bn with Japan, $5.0 with Germany and at $1.5bn with France.