Oil Imports Drive Up Trade Gap in March

Rising oil prices have begun to lead to another problem: they're expanding the U.S. trade deficit. In March, the trade gap widened by $2.7 billion to $48.2 billion, the most since the financial crisis was hitting its climax in October 2008. The news isn't all bad, however. Exports grew in March, hitting a new all-time high. What do these numbers mean for the U.S. economy?

First, here's a chart, summarizing the high-level statistics from the Bureau of Economic Analysis:

trade 2011-03 summary.png

You may recall that both imports and exports ticked down in February. Trade in March erased those losses entirely, as exports rose by $7.7 billion and imports jumped $10.4 billion. Imports are not yet exceeding their pre-crisis highs. You can see from the chart that the gap is much smaller now than it was in mid-2008, even though exports have recovered.

It's pretty clear what's drove up imports in March. Crude oil, petroleum products, and fuel oil together accounted for $5.7 billion of the increase -- more than half. Without the help of oil, the trade gap would have shrunk in March. Here are some of the goods that accounted for big changes in exports and imports from February to March:

trade 2011-03 movers.png

You can see that, other than oil, the only other imports with very large increases were autos and computers. But you'll also notice that the U.S. exported quite a few autos as well, though not as many as it imported.

Overall, this report doesn't provide wonderful news, but it isn't terrible either. Yes, the trade gap rose, which we don't like to see. But it was driven up by rising gas prices -- not by any sort of fundamental shift of Americans demanding more goods from overseas.

Meanwhile, exports hit a new high, while imports were at a low level relative to their pre-crisis highs. So the narrative here is that the trade gap may continue to slowly increase, but exports appear to be growing pretty consistently. Over the past year, they're up $22.4 billion, or 15%.