April 2011 Trade Balance: A Glass Half Full

According to the Bureau of Economic Analysis the trade balance improved somewhat in April 2011:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $175.6 billion and imports of $219.2 billion resulted in a goods and services deficit of $43.7 billion, down from $46.8 billion in March, revised.  April exports were $2.2 billion more than March exports of $173.4 billion. April imports were $1.0 billion less than March imports of $220.2 billion.

In April, the goods deficit decreased $3.0 billion from March to $58.1 billion, and the services surplus increased $0.2 billion to $14.4 billion. Exports of goods increased $2.0 billion to $126.4 billion, and imports of goods decreased $1.0 billion to $184.5 billion. Exports of services increased $0.2 billion to $49.1 billion, and imports of services were virtually unchanged at $34.7 billion.

The goods and services deficit increased $2.2 billion from April 2010 to April 2011. Exports were up $27.8 billion, or 18.8 percent, and imports were up $30.0 billion, or 15.9 percent.

The view of the unadjusted data agrees the BEA’s opinion.  Exports (below graph) are down – but are normally down in April.  Visual inspection indicates the trend is likely flat – in other words year-over-year change is the same as in prior years between March and April in 2011.

The same is true with imports (below graph) – it seems to be down a normal amount comparing April and March 2011.

The trade balance deficit also normally grows in April over March – but this April 2011 it only rose microscopically.

So is this good news?  Not sure.  History tells us that growing imports mean a growing economy.  Clearly there was no import growth impliying a flat economy.  The import data is neutral from a GDP perspective (do not confuse GDP with the Main Street economy) because increasing imports subtract from GDP change.

The trade data does not reveal specific clues about what may be driving the economy, including ongoing affects of the Japanese tsunami or rising commodity prices.  However, it is reasonable to speculate that inflation and a slowing world economy may be likely be the best explanation for the flat data.

Overall, we’ll call the glass half full for the April trade balance data.  However, that is entirely a judgement call – the data does not provide a definitive picture.

Related Article:

An Alternate View of the Trade Balance Trend by Steven Hansen