Trade Balance Improves in April

The WSJ details:

The U.S. deficit in international trade of goods and services declined 6.7% to $43.68 billion from a downwardly revised $46.82 billion the month before, the Commerce Department said Thursday. The March trade gap was originally reported as $48.18 billion.

The April deficit was much smaller than Wall Street expectations, with economists surveyed by Dow Jones Newswires having predicted a $48.3 billion shortfall.

A rebound in oil prices to levels not seen since the 2008 spike erased the modest reduction in the trade gap from late last year. But Nymex crude futures have settled back to around $100 a barrel after surging to nearly $115 a barrel in early May.

In other words, expect the fall in both the demand and the price for oil to continue to reduce the trade balance going forward in both real (due to demand) and nominal (due to price) terms.

And over the longer run...

The below chart compares April 2010 and April 2011 trade balances* for a number of items in real terms.

Note the big improvement in industrial supplies (though this may be due to the disruption in Japan - a drop of $3.2 billion in imports came from March alone) and the big jump in consumer goods imports. The latter is a trend I imagine will continue as consumers look for cheaper and cheaper goods that are increasingly produced outside of the U.S.

Not broken out is trade in oil, which improved greatly in real terms; exports up by $700 million, imports down by $2 billion (the problem is the price more than made the trade balance worse in nominal terms).

Source: Census