US trade deficit falls, inflation data mixed

The US trade deficit was down in February, but mostly due to a fall in imports as exports also fell. Reuters reports:

The February trade gap fell to $58.4 billion, as crude oil imports fell sharply to the smallest in four years and average imported oil prices were the lowest since December 2005, a government report showed...

Overall U.S. imports fell 1.7 percent in February to $182.4 billion...

Overall U.S. exports retreated 2.2 percent to $124.0 billion...

Meanwhile, consumer sentiment continues to slide even as inflation expectations are rising.

The Reuters/University of Michigan Surveys of Consumers said the preliminary April reading of its consumer sentiment index slid to 85.3 from 88.4 in March.

The April result was the lowest since 82.0 in August 2006 and marked the third straight fall in the index...

The sentiment survey also showed its one-year inflation index popping to 3.3 percent in April after holding steady for three months at 3.0 percent.

But wholesale price inflation in March was mostly concentrated in energy.

Rising energy prices boosted overall producer prices in March by a greater-than-expected 1 percent, a Labor Department report showed. But without food and energy, prices on the producer level were flat that month.

Asha Bangalore at Northern Trust analysed yesterday's data and had the following to say:

To the extent that core wholesale prices are contained and core intermediate goods prices are moderating, the threat of troubling inflation is not significant. But, the upward trend of energy and food prices and the impact of a pass-through of higher energy prices present a risk...

The trade deficit improved slightly in nominal terms in February... However, after adjusting for inflation the trade deficit of goods widened in February to $57.3 billion from $56.9 billion in the prior month. Effectively, the January-February inflation adjusted trade deficit for goods is wider than the average for the fourth quarter, implying that trade gap is likely to be a drag on GDP growth in the first quarter.

The 3.7% drop in inflation-adjusted exports is bothersome...

And Calculated Risk reminds us:

Also notice the prior time period when the trade deficit declined slightly... right before the recession of 2001.

Meanwhile, in the euro zone, the ECB may have left interest rates unchanged on Thursday but the central bank remains committed to further rate hikes. Reuters reports:

European Central Bank Governing Council Member Yves Mersch said on Friday the euro zone faces risks from inflation and the process of raising interest rates was not yet complete...

In remarks a day after the ECB left rates unchanged at 3.75 percent, but cemented expectations it would hike to 4 percent in June, Mersch also stressed euro-zone growth could weather a slowdown in the United States, while inflation was a worry.

Recent economic data in the euro zone have been encouraging, with fourth quarter GDP growth being confirmed at 0.9 percent and industrial production in February rising 0.6 percent.