22 September 2017

US Trade Deficit Narrows, But Not Enough to Help GDP

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The U.S. trade deficit narrowed in March as exports rebounded, but the improvement was probably not enough to prevent the government from revising down its estimate of first-quarter growth to show a contraction.

The Commerce Department said on Tuesday the trade gap shrank 3.6 percent to $40.4 billion, broadly in line with economists' expectations. When adjusted for inflation, the deficit dipped to $49.4 billion from $49.8 billion in February.

March's shortfall, however, was a bit bigger than the $38.9 billion that the government had assumed in its advance first-quarter gross domestic product estimate published last week.

Economists said the data implied about a two-tenths of a percentage point reduction to the first quarter's 0.1 percent annual growth pace. The report came on the heels of March construction spending and factory inventories data that also proved weaker than the government had assumed in its advance GDP report last Wednesday.

"There is a very high chance that GDP will be revised to show a contraction in the first quarter, possibly in the neighborhood of minus 0.5 percent," said John Ryding, chief economist at RDQ Economics in New York.

That would be the first quarterly contraction in three years.

The government will publish revised GDP figures later this month. In its initial report, it estimated trade subtracted 0.83 percentage point from economic growth, with exports posting their largest quarterly decline in five years.

Click here for the full article from Reuters.

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