March 2010 International Trade: Higher Volumes but Flat Prices

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World trade volume went up by 3.5 percent in March, following an increase of 1.7 percent in February, according to the Netherlands Bureau for Economic Policy Analysis (known by its Dutch acronym CPB). Trade volumes increased worldwide, with the notable exception of Japanese imports. Both exports and imports of the euro area grew “remarkably fast.” In March, world trade was 4 percent below the peak level reached in April 2008 and 21 percent above the trough reached in May 2009. Imports into emerging Asia were already 13 percent higher than their April 2008 peak.

CPB also estimates that average world prices rose slightly (0.4 percent) between February and March, breaking a two-month string of declines. Prices remain 15.2 percent below the July 2008 peak and 4.8 percent above the January 2009 trough.

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Narrowing the focus to the United States, total March exports of $147.9 billion and imports of $188.3 billion resulted in a goods and services deficit of $40.4 billion, the largest deficit since December 2008. March exports were $4.6 billion more than February exports of $143.3 billion, while imports were $5.6 billion more than February imports of $182.7 billion.

The February-to-March rise in goods exports reflected increases in industrial supplies and materials ($2.1 billion); other goods ($0.9 billion); consumer goods ($0.7 billion); capital goods ($0.5 billion); and foods, feeds, and beverages ($0.1 billion). Automotive vehicles, parts, and engines were virtually unchanged.

Imports of goods increased in industrial supplies and materials ($3.6 billion); automotive vehicles, parts, and engines ($1.2 billion); consumer goods ($0.5 billion); foods, feeds, and beverages ($0.4 billion); and capital goods ($0.3 billion). A decrease occurred in other goods ($0.1 billion).

The U.S. trade report was characterized as "very strong" by David Greenlaw and Ted Wieseman, economists for Morgan Stanley; they noted that the upside came mostly from higher volumes of trade, rather than from higher prices. John Ryding and Conrad DeQuadros, economists at RDQ Economics, agreed with that assessment: "This report speaks to the recovery in the both the United States and overseas as both exports and imports continue to advance at a fairly robust pace.”

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U.S. pulp, paper and paperboard trade followed the larger trade trend, in that both imports and exports rose; in this case, however, the change in exports outstripped that of imports by a wide margin. Interestingly, exports are well ahead of year-earlier levels but imports are barely even.

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Lumber imports and exports both expanded in March, but the change in imports was more than six times larger than that of exports. The lumber trade has picked up modestly relative to the same period in 2009.

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Because the greenback weakened in April against a broad range of currencies, we expect the next report to show the U.S. trade deficit widened once again in April. Concerns over Europe’s sovereign debt problems strengthened the dollar in May, however, and so we anticipate the May deficit will shrink somewhat.