US: Trade data provide decent start to 2Q16 growth – ING

Rob Carnell, Chief International Economist at ING, suggests that following the sharp narrowing of the US Trade deficit in March, April’s advance trade data delivered only a modest widening, setting up 2Q16 net exports to a good start.

Key Quotes

“At only -US$57.532bn, the goods balance for the US is barely any wider than it was in March, which itself was a big narrowing from the preceding trend of deficits around -US$62 to -US$63bn. Markets had been looking for the deficit to push back out to around -US$60bn, which itself would have been a reasonable outcome following the scale of the March swing, and this provides a good start to the net export side for 2Q16 GDP.

Moreover, both imports and exports contributed to this favourable outcome, with exports rising 2.4% MoM, and imports rising 1.9% MoM, so there is no suggestion that the deficit is simply improving due to contracting domestic demand. And external demand and USD competitiveness do not seem to be constraining US trade currently either.

Moreover, within the import section of the data release, capital goods imports have recovered partly from earlier weakness, which could presage some recovery in investment activity following two consecutive quarters of contraction.

It is unlikely that the Fed will be unduly moved by this release itself in terms of the June vs July FOMC rate hike decision. But this report does suggest that, at least from a manufacturing perspective, the US economy remains in reasonably good shape. Today’s release on durable goods and shipments will be a more important determinant of this rate meeting decision, along with the next retail sales release the day before the 15 June meeting.”