The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit fell from $43.63 billion in February to $38.83 billion in March. This is the second-lowest level since January 2010, almost equaling the trade deficit of $38.14 billion of December 2012.
This was a significant and unexpected narrowing in our trade position, resulting from a sharp drop in goods imports which exceeded the decline in goods exports. Goods exports decreased from $132.18 billion to $130.35 billion; whereas, goods imports went from $192.93 billion to $186.49 billion.
Unlike the changes seen in the past couple months, the narrowing in March was due mostly to non-petroleum factors. The petroleum trade balance eased marginally from $21.45 billion to $21.13 billion, with the non-petroleum trade balance dropping from $38.62 billion to $34.76 billion. With that said, petroleum exports and imports were lower, with cost mostly likely helping to reduce these values by almost equal amounts. The average price of West Texas intermediate crude in March was $92.94 per barrel, down from $95.31 a barrel in February.
There were declines across-the-board in goods exports categories. The largest decrease was in foods, feeds, and beverages, which were down $1.05 billion. This was followed by lower exports for the following major groups: motor vehicles and parts (down $331 million), non-automotive capital goods (down $269 million), consumer goods (down $260 million), and industrial supplies and materials (down $288 million). There were some exceptions, with the most notable being increases in exports for civilian aircraft (up $582 million) and pharmaceuticals (up $441 million).
Meanwhile, goods imports were also lower, as noted above. These declines were as follows: consumer goods (down $3.41 billion), non-automotive capital goods (down $1.51 billion), industrial supplies and materials (down $1.42 billion), and motor vehicles and parts (down $771 billion). This suggests that U.S. consumers have slowed their purchases of foreign goods, much as we have seen with the recent easing in the pace of retail sales data.
The net result has been a slight increase in year-to-date manufactured goods exports. In the first three months of 2013, manufactured goods exports equaled $287.31 billion, or just one percent higher than the $284.54 billion experienced in January to March 2012. With such minimal growth in exports so far in 2013, it is perhaps not surprising that so many of the economic indicators for manufacturing activity have been weak of late. Exports are an important source of growth for many manufacturers, and the slowing growth rates are eating away at business confidence.Additionally, it puts a damper on the nation’s ability to double exports by 2015, which would require a 15 percent growth rate or higher to achieve.
Not surprisingly, exports to Europe right now are extremely challenges, particularly with a widening of their economic challenges. Year-to-date exports to the European Union have declined from $68.73 billion in the first three months of 2012 to $63.25 billion in 2013. Exports to our largest trading partners, Canada and Mexico, were up slightly (from $71.65 billion to $72.40 billion and from $53.10 billion to $53.59 billion, respectively). One of the faster areas for export growth is South America, which has seen year-to-date exports grow from $42.99 billion in 2012 to $45.36 billion. South and Latin America continue to present tremendous opportunities for U.S. manufacturers, much as they have in previous years.
Chad Moutray is chief economist, National Association of Manufacturers.