Japanese and US leading indices indicate weakness, US trade deficit improves

The rise in Japan's leading index above 50 in February could not be sustained in March. From Bloomberg:

Japan's economy may slow as cooling export growth prompts companies to cut output, the government's broadest outlook indicator showed.

The leading index, derived from 12 statistics including production and stock prices, fell to 20 percent in March from 54.5 the previous month, signaling growth will slow over the next two quarters, the Cabinet Office said today in Tokyo. The index has been below 50 in nine of the past 12 months...

The coincident index fell to 33.3 percent in March from 70 in February, today's report showed.

In the US, the ECRI's leading index improved last week but remained in recession territory. Reuters reports:

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index edged up to 133.5 in the week to May 2 from 131.8 in the prior week, revised from 131.9...

The index's annualized growth rate remained negative, but improved to minus 8.0 percent from minus 8.7 percent.

There was also an improvement in the US trade deficit in March. Reuters reports:

The trade gap shrank 5.7 percent in March to $58.2 billion, the Commerce Department reported on Friday, much smaller than expected...

The narrowing trade gap means the U.S. economic growth was somewhat stronger than first estimated. Based on the trade data, Gault said he expected the government to raise its estimate of first quarter U.S. economic growth to 0.9 percent, from an initial reading of 0.6 percent last month.

Ian Shepherdson, chief U.S. economist with High Frequency Economics, pegged first quarter growth at 1.1 percent because of a stronger-than-expected contribution from trade.

But there were negatives in the trade report as well.

... The decline reflected...a record $6.1 billion drop in imports to $206.7 billion, which showed the U.S. slowdown has taken a toll on consumer and business demand for foreign goods...

U.S. exports retreated slightly in March, but were still the second highest on record at $148.5 billion...

In fact, Brad Setser says that:

... there actually wasn’t a lot to like in this month’s trade release.

... [M]uch of the fall in the deficit came from a big fall in the volume of imported petroleum...

The real problem though was on the export side. Export growth looks to be slowing...

The improvement in the nominal trade balance...also has stalled.

It isn’t hard to see why: oil

And with oil prices hitting records on a daily basis recently, it's going to be tough to see further improvement in the trade deficit without significant falls in import volumes.