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Trade deficit narrows as import demand drops
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WASHINGTON - The U.S. trade deficit narrowed sharply in March as demand for imports fell by the largest amount since the last recession was ending. Analysts forecast that trade would continue to be one of the economy’s few bright spots this year.
The March deficit totaled $58.2 billion, down 5.7 percent from February, the Commerce Department reported Friday. It was a much larger improvement than had been expected.
The smaller deficit was driven by a 2.9 percent drop in imports, which reflected widespread weakness in demand as consumers, battered by a severe housing slump, a credit crisis and soaring gasoline prices, cut back on their purchases of both domestic goods and imports. It marked the biggest one-month decline in imports since December 2001, when the country was struggling to emerge from the last recession.
Many analysts believe the country has fallen into another recession, although the better-than-expected trade performance prompted some economists to project that growth will be revised up from the barely discernible 0.6 percent rate reported last week to a slightly more respectable 1.1 percent rate for the first three months of this year.
That could mean the country will be able to avoid a full-blown downturn, although growth at that level would still be viewed as a so-called growth recession in which the economy does not expand fast enough to prevent unemployment from rising.
Mark Zandi, chief economist at Moody’s Economy.com, said he still believed the current slowdown would be ruled a recession because growth will dip into negative territory in the current quarter.
“I still believe this is a recession and I think ultimately at the end of the day, it will be labeled as one,” he said, adding that export growth will continue to cushion the drag from housing and other weak sectors.
On Wall Street, stocks ended the week with a big decline as investors grappled with continued turmoil in the credit market and surging energy prices. The Dow Jones industrial average fell 120.90 points Friday to close at 12,745.88.
Imports totaled $206.7 billion in March, down $6.1 billion from February, a drop led by a 5.9 percent decrease in America’s foreign oil bill. The amount of petroleum shipped into the country declined, although the average price for a barrel of imported crude shot up to a record $89.85.
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