US: Sharp decline in trade deficit probably fleeting - Wells Fargo

According to analysts from Wells Fargo, one-off factors likely played a key role in the decline in the US trade deficit recorded in Mach: “a jump in aircraft exports and the timing of the Chinese New Year.” 

Key Quotes: 

“The U.S. trade deficit narrowed sharply in March, falling from a 9-year high of $57.7 billion in February to $49.0 billion.”

“The jump in exports was generally broad based, but it was led by the $1.9 billion rise in exports of aircraft (...) Although petroleum products account for less than 10 percent of total U.S. exports, their share is growing due to the rebound in oil prices over the past two years and the increase in the nation’s oil production to more than 10 million barrels per day.”

“Weakness in imports can often signal softness in domestic demand, but recently-released GDP data show that growth in U.S. domestic demand was reasonably solid in the first quarter. Rather, the sharp drop in imports in March may reflect, at least in part, the timing of Chinese New Year, when Chinese ports close (...) Moreover, import growth was very strong in February, so some payback is to be expected.”

“Real net exports likely will not exert much drag on overall GDP growth in Q2, and they could even provide a modest boost depending on the dynamics in the next few months. Looking further ahead, economic growth in America’s trading partners should continue to provide a boost to exports, while solid growth in U.S. domestic demand should continue to pull in imports. We forecast that real net exports will be broadly neutral to overall U.S. real GDP growth.”