US trade gap shrinks in March as imports fall

The US trade deficit narrowed sharply in March as imports fell and the gap with China diminished, the Commerce Department reported Wednesday.

The deficit shrank nearly 14 percent from February to $40.4 billion, its lowest level in a year.

The decline followed two consecutive months of a widening gap and was sharper than expected.

The March trade data reflected sluggish US growth in the first quarter and weak demand in the slowing global economy.

"The US trade deficit contracted significantly in March, but the details show little cause for optimism," said Emily Mandel of Moody's Analytics.

Imports fell 3.6 percent in March to $217.1 billion while exports fell a much smaller 0.9 percent, to $176.6 billion.

Imports of goods fell to their lowest level since December 2010, while imports of industrial supplies and materials were at their lowest since April 2004.

Weighed down by falling oil prices, US imports of petroleum products slid to $9.4 billion, a low last seen in 1999.

US exports of foods, feeds and beverages, as well as industrial supplies, were the weakest in six years.

"Strength in the US dollar and soft demand abroad continue to weigh on exports, and broad-based weakness in imports suggests that domestic demand may be slackening," Mandel said.

However, while the strong dollar has been a drag on exports, a recent weakening of the US currency could help ease the trade tailwind.

The politically sensitive goods trade gap with China narrowed more than 34 percent to $20.9 billion, a two-year low.

The trade gap in goods with the European Union, meanwhile, swelled 31 percent to $13.1 billion.

The shortfall with Canada, the number-two trade partner after China, shrank sharply to $121 million from $959 million in February.

Declining US exports contributed to the economy's near-stall at the start of the year. Last week the Commerce Department estimated that first-quarter gross domestic product grew at a paltry 0.5 percent annual rate.

Ian Shepherdson of Pantheon Macroeconomics said that although the March trade data was better than expected, it would not change the overall picture of first quarter growth because of negative revisions to January and February trade numbers.