US trade deficit narrows in March as imports record biggest drop since 2009

WASHINGTON (REUTERS) - The United States' trade deficit fell more than expected in March, as imports recorded their biggest drop since 2009, the latest sign of slowing domestic demand.

The Commerce Department said on Thursday the trade gap narrowed 11 per cent to US$38.8 billion (S$47.5 billion), the second smallest since January 2010. February's shortfall on the trade balance was revised to US$43.6 billion from the previously reported $43.0 billion.

In March, the inflation-adjusted trade deficit narrowed to US$44.4 billion from US$47.8 billion in February. Trade weighed on first-quarter growth, cutting half a percentage point off gross domestic product.

The US economy grew at a 2.5 per cent annual rate in the first three months of the year, and the smaller-than-expected trade gap could cause the government to revise higher this estimate. The smaller trade gap in February reflected a 2.8 per cent fall in imports of goods and services to US$223.1 billion.

The percentage drop was the biggest since February 2009. The decline in imports of goods was almost broad based, adding to signs of sluggish domestic demand already flagged by weak retail sales and manufacturing data.

In March, exports of goods and services slipped 0.9 per cent to US$184.3 billion. Exports have been one of the bright spots in the economy, but are being crimped by a slowing global economy, which is hurting manufacturing.

A recent strengthening of the US dollar, even though the Federal Reserve has firmly remained on its ultra-easy monetary path, is also taking the edge off export growth. The greenback gained about 1.5 per cent on a trade-weighted basis so far this year.

US exports to the 27-nation European Union rose 14.4 per cent in March to US$22.9 billion. Exports to the EU in the first three months of the year were down 8.0 per cent compared to the same period last year.

Exports to Britain fell. Exports to China, which have been growing more slowly than in recent years, rose 1.4 per cent in March. China has been one of the fastest growing markets for US goods, and exports to that country were up 4.3 per cent for the first three months of 2013.

Imports from China fell 16.5 per cent to US$27.3 billion in March, pushing down the contentious US trade deficit with China to US$17.9 billion, the lowest since March 2010, from US$23.4 billion in February.