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Trade deficit unexpectedly shrank to 55b Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=a6U_x3A1Xhko&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=a6U_x3A1Xhko&refer=home
U.S. Economy: March Trade Gap Shrank to $55 Billion (Update2)
May 11 (Bloomberg)-- The U.S. trade deficit unexpectedly shrank in March to $55 billion, the narrowest in six months and a sign the economy was healthier in the first quarter than the government initially estimated.
Exports were an all-time high and imports of consumer goods declined after a record trade gap of $60.6 billion in February, the Commerce Department said today in Washington. The median forecast in a Bloomberg News survey of 67 economists called for a deficit of $61.9 billion.
``It's a relief,'' said James Glassman, senior U.S. economist at JPMorgan Chase & Co. in New York, in an interview. ``It does dampen the fears that there was something bad going on in the U.S. economy.'' First-quarter growth was ``closer to 4 percent'' than the 3.1 percent the government estimated last month, he said.
U.S. manufacturers sold more consumer goods and business equipment abroad in March, aided by a dollar that has declined about 7 percent against a basket of major currencies in 12 months. A surge in payrolls and forecasts for a bounceback in retail sales last month also point to a strong second quarter.
The good news on the trade deficit may not last long as Americans keep snapping up foreign-made televisions, electronics and automobiles, economists said. The dollar gained after today's report, which may be a drag on future exports. And even with a slowdown in shipments from China, the trade deficit with that country is up 40 percent this year from January-March 2004.
``The consumer has not gone away, and the fascination with imported consumer durable goods will continue,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York.
GDP Revisions
The deficit was narrower than even the lowest forecast of $58 billion in the Bloomberg survey. The dollar rose to the highest in almost a month against the euro and increased against the yen. Versus the euro, the dollar rose 0.6 percent to $1.2808 at 1:30 p.m. in New York, according to currency-dealing system EBS. The dollar rose to 105.71 yen from 105.56 yesterday.
Lehman Brothers economists said the economy probably expanded at a 3.7 percent annual rate in the first quarter, following the March trade data. Economists at RBS Greenwich Capital, Bear Stearns & Co. and Morgan Stanley also raised their first-quarter growth estimates.
Impact of Dollar
The trade gap narrowed in March even as oil imports rose. Prices climbed to their highest since November.
Imports of all goods and services fell 2.5 percent in March, the biggest drop since December 2001, to a three-month low of $157.2 billion. Exports rose 1.5 percent to $102.2 billion.
The dollar's decline, coupled with improved demand, may help explain why exports of capital goods rose 3.4 percent in March to $29.1 billion and exports of consumer goods climbed a record $9.5 billion.
``We're very positive about the global economy,'' said Roger MacFarlane, chief executive of UTI Worldwide Inc., in an interview. The company, based in the British Virgin Islands, specializes in services such as freight forwarding and warehousing.
Exports of civilian aircraft rose 27 percent to $2.4 billion. Boeing Co., the world's second largest maker of jetliners, has been increasing sales. SkyEurope Airlines AS, a low-cost carrier in Slovakia, on May 10 agreed to buy 16 of Chicago-based Boeing's 737-700 aircraft valued at $880 million. The company also took options to buy 16 more aircraft.
Exports of telecommunications equipment rose to $2.1 billion from $1.9 billion. Global demand for semiconductors and computer equipment may also be picking up.
Telecommunications
Cisco Systems Inc. said yesterday its profit rose 16 percent in the quarter that ended April 30, compared with a year earlier. The San Jose, California-based company, the world's largest maker of equipment that links computers and directs Internet traffic, said it won orders from British Telecom had agreements with companies in Canada, South Korea and Japan as well.
``We saw solid results in the U.K., Italy and Spain,'' Cisco's chief executive officer, John Chambers, told investors and analysts on a conference call yesterday. ``On a very positive note, we saw order momentum improve in France and Germany.''
Imports from China slowed for a second month, and U.S. exports to China were the highest in a year. The deficit with China narrowed to $12.9 billion from $13.9 billion. None of this is likely to ease demands on Capitol Hill for the Chinese government to change its currency policy.
Oil Imports
``After three months, China's surplus is $42 billion, a nearly 40 percent increase from last year,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. ``The pressures on China to allow their currency to float will only intensify.''
China has pegged the yuan at 8.3 to the dollar since 1995, and critics say that keeps Chinese exports cheap. China's Deputy Finance Minister, Li Yong, said May 6 that the government is ``working very hard'' to revise its exchange-rate system.
Harry Reid, the top Democrat in the U.S. Senate, says opposition from his party will block passage a proposed Central American Free Trade Agreement. Senators Charles Schumer, Democrat of New York, and Lindsey Graham, Republican of South Carolina, call for tariffs of almost 28 percent on imports from China unless it ends the decade-old currency peg.
Oil imports rose in March to $13.4 billion, the highest since November. Volume increased, and the price per barrel rose to $41.14 from $36.85.
Imports of consumer goods fell 6.8 percent to $32.7 billion. Imports of capital goods fell 1.1 percent to $29.6 billion. Imports of automotive vehicles and parts fell 6.3 percent to $18.7 billion.
Last Updated: May 11, 2005 13:54 EDT
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