Trade deficit falls, but signal is mixed

Well, at least one part of the U.S. economy is attempting to right itself: the trade deficit, which continued to narrow in January to $36.0 billion, the U.S. Commerce Department announced Friday.

That's the smallest monthly trade gap since October 2002. Economists surveyed by Bloomberg News had expected a $38.1 billion deficit. It's also the trade deficit's sixth straight monthly decline -- a macro trend that will no doubt gladden the hearts of commerce officials. The U.S. recorded a $39.9 billion trade gap in December 2008.

Nation's oil bill declines

The key driver in the trade deficit's progress? A declining bill for oil imports, which reduced the overall deficit. The bill for imported crude oil fell to just $11.9 billion in January -- its lowest level since early 2005 -- driven lower by a sub-$45 per barrel average oil price. Overall imports fell 6.7 percent to $160.9 billion.

Meanwhile, exports fell 5.7 percent to $124.9 billion in January, their lowest level since late 2006.

The report's downside? Manufacturing continues to suffer. "It's not a good report for U.S. manufacturing," Julia Coronado, a senior U.S. economist at Barclays Capital Inc. in New York, which forecast the deficit would narrow to $35.5 billion, told Bloomberg News Friday. "This is certainly a sign that the global weakness is feeding into the domestic economy through the export channel."

Economic Analysis: For investors, an upside/downside January trade report. The upside clearly was the lower oil import bill and lower overall monthly deficit. The downside? We're seeing lower demand at home (imports) and abroad (exports); that suggests a pervasive economic slowdown, both in the U.S. and globally, and it confirms other slowdown data.

Bottom Line: Nations need to do more, from a demand creations standpoint, to get the globally economy moving again.

Read Full Story


DJIA 25,250.55 -89.44 -0.35%
NASDAQ 7,430.74 -66.15 -0.88%
NIKKEI 225 22,326.56 55.26 0.25%
HANG SENG 25,574.40 129.34 0.51%
DAX 11,614.16 90.35 0.78%
USD (per EUR) 1.16 0.00 0.04%
USD (per CHF) 0.99 0.00 0.06%
JPY (per USD) 112.03 0.19 0.17%
GBP (per USD) 1.32 0.00 0.00%