As the American consumer begins spending again, U.S. retailers aren't the only ones that benefit: foreign firms are also cashing in by selling Americans their goods and services. Yet other nations aren't importing as many products from the U.S, as the trade deficit continued to widen for the second month straight in March. It rose 2.5% to $40.4 billion, after increasing 6.7% in February, according to the Commerce Department. Even though the trade deficit continued to grow, it grew more slowly in March. Looking behind the numbers, you can find some reason for optimism in this trend.
In fact, U.S. exports grew faster than imports in March, by 3.2% and 3.1%, respectively. This begins to explain why the trade deficit growth slowed. Even though exports grew faster than imports, the nominal trade balance favored imports: exports increased by $4.6 billion, while imports increased by $5.6 billion.
Considering the breakdown of goods and services, it's pretty clear that Americans prefer importing goods more than services. Imported goods grew by 4.0%, while imported services actually fell by 1.3%. Exported services, however, grew by 0.9%. The U.S. has a trade surplus for services, which widened to $12.5 billion in March -- its highest level since June 2008.
Exports have grown significantly since January, by 3.5%. Will that trend continue after the first quarter? It's hard to tell. If the Greece problem destabilizes Europe and causes a double-dip global recession, then demand for U.S. products will decline. And even if that worst-case scenario doesn't occur, the recent strengthening of the dollar versus the euro could make American goods and services less attractive to Europeans. Yet, the dollar has been steadily gaining over the euro since December, and it hasn't prevented U.S. export growth thus far. Whether Europe's problems will affect U.S. trade might become clearer in April's numbers.
Note: All values above are seasonally adjusted.
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