The Department of Commerce, said today that international trade in goods and services: total April exports of $155.5 billion and imports of $216.4 billion – resulted in a deficit of $60.9 billion or 7.8% up from the revised $56.5 billion March trade gap.
Exports of goods and services increased 19.2% y/y, up $4.9 billion in April to $109.6 billion and $0.4 billion to $46.0 billion, respectively. In April, the goods and services deficit increased $0.6 billion from April 2007.
Imports increased 4.5% from $207.1 bln to $216.4 bln, up $9.3 billion in April, recording this way a rebound from last month’s steep decline.
Imports are up $25.7 billion, or 13.4 percent y/y. The rise in imports of $3.4 bln, was led by crude. Oil and other petroleum products and natural gas added $5.3 bln to the US import bill for April, producing an almost $35 bln petroleum deficit, the second highest on record. The average price of an imported barrel of oil was up 7.7% or $6.96, to a record $96.81.
Adjusted for inflation, the trade deficit in goods is $9.8 billion smaller than last April, whereas non-inflation adjusted registered $0.6 bln higher than last year. Commerce Dept. also reported US trade gap with China was up almost 26% to $20.2 bln showing the lack of appreciation of the Chinese yuan against the dollar.
Greenback’s decline during the past year against not only the euro but also against most other currencies, including the renminbi ; needless to say it is already a well-known fact. However, while the declining dollar does reduce americans’ purchasing power, the magnitude of this effect is rather contained, since imports account for only about 14-15% of U.S. GDP.
Dollar depreciation certainly leads to a reduction of americans’ purchasing power but at the same time, a lower dollar makes American products more competitive in global markets, leading to increased exports and reduced imports. (the U.S. trade deficit, in the first Q of fiscal ’08, was running at an annualized pace of $717 billion, or 5.05% of GDP) But, without deviating too much off topic here and not trying to come across as a supporter of a weak dollar – because I am not – today’s report shows that despite a deficit increase in April, net exports will continue to make a large contribution to real GDP growth in the second quarter of fiscal ’08, helping the economy to avoid recessionary conditions.