US Goods and Services Deficit Narrows in March: Insights and Analysis

2023-05-04 13:56:00

After rising for two months in January and February, the US goods and services deficit with the rest of the world narrowed in March. It reached 64.2 billion dollars, down 9.1% over one month, according to data published this Thursday, May 4 by the Commerce Department. This is also below the expectations of analysts, who anticipated a less marked decline with a deficit reaching 68.7 billion dollars, according to the consensus published by briefing.com.

Over one year, the US deficit fell sharply, by 27.6%. The reason: rising exports and falling imports.

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In detail, exports increased by 2.1% in March. The increase mainly concerns energy (oil and gas), despite a drop in average prices in March compared to February.

As for imports, they fell by 0.3%. This fall is found in particular in business equipment and raw materials, a sign of a drop in investment, particularly in industry. Conversely, imports of consumer products are on the rise, especially household equipment, smartphones and, to a lesser extent, pharmaceutical products.

A long-term trend?

This trend should also continue. “Trade flows are very likely to continue to show the effects of slowing growth, domestic and global, in the coming months,” HFE Chief Economist Rubeela Farooqi said in a note.

As a reminder, the American trade deficit reached a record in 2022, at 948.1 billion dollars (+12% compared to 2021). Not since 1960, the year to which US government statistics go back, has it risen to such a level. This was mainly due to the strong increase in imports over the year, which reflected the strong demand from American businesses and consumers for products and services produced abroad in the context of a recovery in international trade after two years. marked by the pandemic.

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The gap is narrowing with China and the EU

If we focus on bilateral trade, the trade deficit with China, which remains the highest, continues to narrow little by little, a sign of the persistent slowdown in trade between the world’s two largest economies. It reached $22.9 billion in March with, again, a drop in imports and an increase in exports. In 2022, China had also lost its rank as the largest trading partner with the United States, a first since 2019, a year marked by an intense trade war between the two countries. The European Union had dethroned it.

Nevertheless, the trend is also towards a reduction in the trade deficit between the United States and the EU in March. Both on the overall deficit and for exports and imports. It should also be noted that the American deficit vis-à-vis Europe is largely concentrated in three countries: Germany, Ireland and Italy.

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(With AFP)