U.S. Trade Deficit Narrowed in March

The deficit with China hit a three-year low.

The overall trade deficit decreased to $38.83 billion, an 11 percent drop from $43.6 billion in February, the Commerce Department reported Thursday.

Exports fell 0.9 percent, to $184.3 billion as sales of machinery, autos and farm products all declined.

Imports fell 2.8 percent, to $223.1 billion, led by a 4.4 percent drop in foreign petroleum. Crude oil imports averaged just seven million barrels a day, the lowest since March 1996.

A smaller trade gap can increase overall economic growth as American companies earn more from overseas sales while American consumers and businesses spend less on foreign products.

For the first three months of this year, the trade deficit is running at an annual rate of $507.7 billion, 5.9 percent below last year’s deficit of $539.5 billion. Economists are looking for the deficit to narrow slightly this year, in part because they expect continued gains in American exports.

Analysts said the lower-than-expected deficit in March will most likely give a slight boost to overall economic growth for the January-March quarter. The government’s first estimate put economic growth at 2.5 percent in the first quarter but some analysts said that could be revised up to perhaps 2.7 percent because of the lower trade deficit in March.

The politically vulnerable deficit with China shrank 23.6 percent in March, to $17.9 billion, still far above the imbalance with any other country.

Separately, the Labor Department reported Thursday that the productivity of American workers barely grew from January through March after shrinking in the final three months of 2012. Weak productivity growth could prompt employers to hire more if consumers and businesses continue to increase spending.

Worker productivity rose at a seasonally adjusted annual rate of 0.7 percent in the first quarter, after shrinking 1.7 percent in the previous quarter.

Labor costs increased at a seasonally adjusted annual rate of 0.5 percent, below the fourth quarter’s 4.4 percent gain.

Productivity is the amount of output per hour of work. It increased because output rose at a faster pace than hours worked.

The trend in productivity has been fairly weak in recent years. For all of 2012, productivity rose just 0.7 percent, after an even smaller 0.6 percent rise in 2011.

Article source: http://www.nytimes.com/2013/05/03/business/economy/us-trade-deficit-narrowed-in-march.html?partner=rss&emc=rss