- The U.S. nominal trade deficit narrowed in March to the lowest level since November 2022.
- Exports rose on the month while there was a slight decrease in imports.
- Trade will likely be a drag on GDP growth this quarter as businesses replenish inventories.
Total exports rose 2.1% in March following a 2.8% decline in February. Total imports fell 0.3% in March following a 1.6% decline in February. The increase in exports in March was driven by a 6.3% jump in industrial supplies exports and a 4.8% increase in automotive exports. Declines in industrial supplies and capital goods imports were partly offset by increased imports in consumer goods. Consumer goods imports in March were down 19.6% from twelve months earlier.
Trade was a modest positive for the U.S. economy in the first quarter, adding 0.1 percentage point to GDP growth. But firms cut back on investment in inventories, which subtracted 2.3 percentage points from annualized growth. Looking ahead, trade will likely be a drag on GDP growth this quarter as business replenish inventories and imports increase. Global trade flows will remain volatile in the short term and weaken through 2023 as inflation, higher interest rates and increased geopolitical tensions weigh on activity. Positives for the trade outlook include China’s reopening and lower global energy prices.
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