Weekly Economic Trends and Indicators
The Headline:
According to a report from the U.S. Census Bureau and the Bureau of Economic Analysis, the U.S. trade deficit in goods and services was essentially unchanged, decreasing 0.1% from $69.5 billion in February to $69.4 billion in March. Exports were $257.6 billion in March, down $5.3 billion from February’s total. Imports were $327.0 billion, down $5.4 billion from February.
The first quarter 2024 trade deficit in goods and services was 3.2% higher than in the first quarter of last year. Both exports and imports were higher in the first quarter of 2024 compared to the same quarter of 2023. Exports were up $9.1 billion, and imports were up $15.6 billion.
The Details:
While total exports of goods and services are up compared to last year, the growth is in services rather than goods. Exports of goods are down about 1.2% compared to this time last year. Imports of both goods and services are up.
Exports of capital goods are the only major category that is up for 2024 compared to the same time last year ($155.5 billion compared to $148.3 billion last year). However, the gains are mostly in the aircraft industry (including aircraft, parts, and engines). Exports of computer accessories, industrial engines, and materials handling equipment are also higher. Exports of consumer goods are down the most in percentage terms (over 5%) compared to last year.
Metro area data on trade is only published once per year, but state level data is available monthly. Through March of this year, Illinois exported $5.1 billion worth of manufactured goods (3rd highest in the U.S. behind Texas and California). Iowa exported $1.4 billion in manufactured goods.
The Context:
Travel-related spending by foreign citizens in the U.S. makes up a large part of exports of services. The increase in the exports of travel services is still largely a recovery from the COVID-19 pandemic when travel exports were cut by more than half. That recovery is nearly complete, so over time we should see less growth compared to the same time last year.
Exports and imports of goods depend on many factors, but some of the most important factors include currency values, inflation and interest rate differentials between countries and economic growth rates around the world.
The dollar has traded in a narrow range over the past several months and remains high compared to a decade ago. This will continue to put pressure on export manufacturers. Making matters worse, is the slowing European economy and the expected interest rate cut by the European Central Bank. Until the Fed starts cutting as well, the greater interest differential could push the dollar higher. This would lead to lower exports, larger trade deficits and slower growth.
Next week: Employment report
