skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

April Trade Balance Sustains the March Gains

Data released today on the April US merchandise trade balance showed the trade deficit holding in April at -$67.3 billion for the month, or at an annual rate of -$808.3 billion per year, compared to -$68.5 billion in March and equivalent to a rate of -$822.2 billion per year. Both these prints are big improvements over the readings through February, which were in the range of -$900 billion per year.

The chart shows the trade balance in inflation-adjusted terms, both total and excluding selected components. Both of these measures also show marked improvement over the last two months, driven by increases in exports and declines in imports. Prior to the March swing, export growth had been listless, while imports had been rising steadily, driving a steady deterioration in the trade balance. This, in turn, had been an ongoing drag on GDP growth.

The sudden reversal of fortune for trade has meaningful implications for domestic growth. The March swing in trade single-handedly boosted 1Q18 GDP growth by a full percentage point. If trade continues through June at the pace of the last few months, that would be a big boost to 2Q18 GDP growth.

What’s caused the sudden turns in both exports and imports? Great question! Growth abroad has appeared to slow in recent months alongside widespread claims that US domestic demand is heating up, while the dollar has strengthened and fears of a trade war have arisen—not an auspicious climate for US imports to suddenly stagger and US exports to suddenly surge. The March/April data, however, suggest that this is exactly what happened.

As demonstrated in the chart, the trade balance has taken a number of contra-trend turns over the last few years, only for the downtrend in the trade balance to eventually reassert itself. We’ll see in coming months whether that happens yet again. In the meantime, the recent improvement in the foreign trade picture is a challenge to our below-consensus growth forecast. As we’ve written, we don’t see any recent acceleration in consumer spending, and domestic capital investment may have downshifted a bit recently. So, in our view at least, the last two months’ turnaround in foreign trade is the one piece of news supporting a stronger growth story.

US Real Foreign Trade Balance
US Real Foreign Trade Balance
Source: Census Bureau. As of 30 Apr 18

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2020. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.