Evidence of a global economic slowdown is expected in Thursday’s report on April U.S. goods and services trade.
Economists look for the report to show an ebbing in the domestic appetite for imports, but warn that a decline in consumer confidence abroad will cap demand for U.S. goods, thus preventing much improvement in the trade deficit. The dollar continues to be relatively strong in the face of the big trade gaps.
“I think the deficit should remain between $30 billion and $32 billion in the second quarter, which should carry no impact on the GDP for the same period,” said Anthony Karydakis, vice president and senior financial economist at Banc One Capital Markets.
Some analysts voiced a guarded optimism about the trade deficit looking forward, but for the time being persistent domestic demand for imports is likely to remain robust, they said.
“Overseas demand will slow down more than the domestic demand,” said Jay Feldman, economist at Credit Suisse First Boston, who forecast an improvement in the stubborn trade gap to $30.4 billion from March’s $31.0 billion. Feldman said he thought U.S. demand for imports would slacken.
This point will be tested in coming months. While consumer confidence is still groping to find a base from which to improve steadily, further economic weakness does not automatically mean a substantial and sustainable improvement in the trade deficit even in the medium to long term. Most of the medium- and low-priced clothing and toys sold in the U.S. are manufactured abroad in order to benefit from cheaper labor.
Relatively stable energy prices will have had a muted impact on the most recent data. In April the price range for oil was $25.55 to $29.04 per barrel, similar to March’s $25.92-$29.15.
