Merk Investments: April Trade Balance

The April trade deficit increased 7.8% on the back of a 12.9% increase in imports of crude oil. The real dollar goods balance fell to -$46.898bln, down slightly from -$46.966bln which will give a modest boost to Q2 GDP. The April real trade balance was the best showing in the data since August of 2003. The ex-petroleum data provided further illustration of the short-term economic boost provided by a weak dollar. Stripped of the increase in oil, the trade balance improved to -$38.941bln month over month and fell -17.0% year over year.

Exports grew by 3.3% fueled by a 4.3% increase goods. The increase in goods was driven by a 23.8% increase in demand for civilian aircraft and a 8.5% climb in the purchase of computers and electronics. Demand for industrial supplies rose 3.4%, consumer goods by 6.5% and automotive goods by 6.8%. Demand for goods on an inflation adjusted basis rose 4.5% and foreign purchases of domestically produced services increased by 0.9%. Imports climbed 4.5% on the back of a 9.1% increase in demand for industrial supplies, 5.2% increase in demand for goods and a 1.7% increase in purchases of consumer goods. On an inflation adjusted basis imports increased by 2.9%.

The series of bilateral deficits saw general deterioration on a monthly basis but were up generally year over year. The deficit with the EU increased to -$9.076bln and that with the Pacific Rim climbed to -$29.157bln. The politically sensitive deficit with China climbed to -$20.239bln on a month over month basis, but declined -1.6% year over year.

The nominal increase in the trade deficit is primarily a result of the sharp increase in the cost of oil and commodities. However, the 17% improvement on an annual basis is a direct result of a weak dollar and the still relatively robust foreign demand for US produced goods. In particular, the demand among Asian countries for civilian aircraft provided a strong jump in the monthly data and should continue to provide a healthy boost to overall growth in Q2 that looks to be trending near 1.7% at this time.

Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author.  It is based upon sources and data believed to be accurate and reliable.  Opinions and forward looking statements expressed are subject to change without notice.  This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.