Trade Gap Narrows, Autos Sales Jump, Claims Fall, Life is Good
- The U.S. International Trade Gap narrowed to -$35.4 billion in February.
- Light Vehicle Sales accelerated to a 17.2 million unit annual rate in March.
- Initial Claims for Unemployment Insurance fell by 20,000 to hit 268,000 for the week ending March 28.
The string of softer-than-expected U.S. economic data was broken yesterday and this morning with better-than-expected trade, auto sales and UI claims. However, the trade numbers look quirky and may be less positive than the headline numbers imply. The U.S. international trade gap narrowed noticeably from -$42.7 billion in January to -$35.4 billion in February. Exports of goods dipped by $2.9 billion in February while exports of services were little changed. The beneficial push to the overall numbers came from the imports of goods, which declined by $10.3 billion for the month, while the imports of services were little changed. The biggest swing in goods imports came from industrial supplies and materials. Crude oil and other petroleum products are a part of that grouping. Crude oil imports fell by $2.3 billion in February and other petroleum product imports dipped by another $0.4 billion. Nonautomotive capital goods imports also fell by $2.6 billion. After adjusting for price effects, the real balance of trade in goods fell by $3.8 billion ($2009) in February. So far, the January and February average for the real balance of trade in goods is still slightly worse than the 2014Q4 average, implying that trade will still be a small negative for 2015Q1 GDP. So even though the nominal headline number for February looks good, the first quarter 2015 numbers may not be favorable, especially if we see some reversion to the export and import data in March.
Auto sales accelerated back to a 17.2 million unit annual rate in March; a number last seen in November. The slide in sales through December, January and February ran counter to strong job growth and falling gasoline prices. So it looks like some pent-up demand over the winter got spent out in March. The 17.5 million unit mark from last August is still the local high point. We expect that auto sales will stay strong this year but are cresting at their cyclical high. Improving residential construction activity this spring may support pickup truck sales, although cooler oil drilling activity is a downer. Initial claims for unemployment insurance fell by 20,000, reaching a very low 268,000 for the week ending March 28. Even with reduced expectations for tomorrow’s official payroll report for March, U.S. labor market indicators are all going in the right direction. Regionally, we note that Texas led states with a 2,035 increase in UI claims for the week, likely related to reduced oil field activity.
Market Reaction: U.S. equity prices are up. The 10-year Treasury Bond yield is up to 1.90 percent. NYMEX crude oil is down to $49.47/barrel. Natural gas futures are up to $2.67/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Int Trade 04-02-15.