The big news from yesterday was on the US trade deficit released by the Commerce Department. The deficit fell to US$55.0 billion, US$5.6 billion less than the revised US$60.6 billion in February. A fall in imports -- by US$4.1 billion compared to February -- accounted for most of the drop in the deficit.
Kash at Angry Bear has a couple of posts on the trade data.
"US Imports: What and from Where?" looks at the sources of US imports and finds that they include not only low-cost countries like China but also countries like Canada and the EU. The conclusion: "The cause of the trade deficit is therefore clear: it is simply the direct result of the US's lack of saving."
"The US's Comparative Advantage" looks at the categories of goods that the US has a comparative advantage in and finds that these include agricultural products, capital goods and industrial supplies. He concludes that "as soon as individuals and/or the federal government in the US start spending less and saving more, we can expect trade surpluses to return in those categories."
The macroblog reports on the news and also points to a paper on the sustainability of the US current account deficit by Michael Kouparitsas from the Chicago Fed, which concludes as follows:
My estimates suggest that the U.S. net export deficit must fall by 3% to 3.5% of GDP to maintain the current net foreign asset to GDP ratio. However, I also note that if the U.S. continues to enjoy relatively high rates of return on its foreign assets, the resulting net foreign income surplus would allow it to run relatively large net export deficits without much change in the net foreign asset to GDP ratio.
Predictably, Brad Setser had something to say about this conclusion -- see the comments section of the post.
Over at his own blog, Setser and his readers also discuss the trade deficit. The points on seasonal effects are especially interesting.
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