Trade Gap Wider than Expected in February, Weighing on Q1 GDP
- The U.S. Trade Gap widened modestly in February, to -$57.6 billion.
- Initial Claims for Unemployment Insurance gained 24,000 for the week ending March 31, to hit 242,000.
The U.S. international trade gap widened modestly in February, to -$57.6 billion, from -$56.7 billion in January. Some of the push on the trade gap came from TV royalties paid out for the Winter Olympics. Total exports increased by 1.7 percent to $204.4 billion in February, while imports also increased by 1.7 percent to $262.0 billion. For January and February, the two-month average of the real (inflation adjusted) trade gap in goods was $128.1 billion ($2009). This is almost exactly the three-month average for the fourth quarter of 2017. This means that as of now, trade looks like it will be a neutral factor for 2018Q1 real GDP. Trade was a big drag in 2017Q4, subtracting 1.2 percentage points from real GDP growth in the quarter. Some of that drag can be attributed to the surge in electronics imports due to the launch of the iPhone 10 last fall. If trade would have been a neutral factor in the fourth quarter of last year, real annualized GDP growth for the quarter would have been a robust 4.1 percent. We are expecting the trade gap to narrow in March, supporting our real GDP growth forecast of about 3.0 percent for the first quarter of 2018. If the trade gap does not narrow in March, we may have to adjust our expectations for GDP down. Fortunately, the unexpected surge in U.S. auto sales in March, back up to a 17.5 million unit annual rate, is a positive factor for first quarter GDP.
Initial claims for unemployment insurance increased by a larger-than-expected 24,000 for the final week of March, to hit 242,000, still a very low level. The UI claims weekly data can be jumpy this time of year because of weather, seasonal adjustment factors and the timing of the Easter holiday. Continuing claims for unemployment insurance fell by 64,000 for the week ending March 24, to hit a very low 1,808,000. We see nothing in the weekly labor data to alter our expectation of about 210,000 net new payroll jobs in the March payroll data that will be released tomorrow morning.
Market Reaction: U.S. equity markets opened with gains. The yield on 10-Year Treasury bonds is up to 2.82 percent. NYMEX crude oil is up to $63.64/barrel. Natural gas futures are down to $2.67/mmbtu.
For a PDF version of this report click here: International-Trade-04052018.
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