Trade Deficit Widens on Energy Imports, Import Prices Decelerate, Job Market Remains Healthy

- The Trade Deficit for March widened to -$63.9 billion versus estimates of -$60.0 billion and a downwardly revised -$57.9 billion in February.
- The Import Price Index for April rose 1.3% versus estimates of a 1.0% gain and a downwardly revised 1.5% increase in March.
- Initial Jobless Claims fell to 297K versus estimates of 315K and 306K the prior week.

BOTTOM LINE: The US trade deficit widened more than forecast in March as higher crude oil shipments drove the biggest increase in imports in more than four years, Bloomberg said. Imports from China fell. Imports of petroleum products rose to $24.6 billion from $20.9 billion the prior month. Shipments to the US of consumer goods surged to a record $40.1 billion as spending stayed strong enough in March to sustain demand. I continue to believe the US trade deficit will only improve modestly over the intermediate-term as US growth accelerates, mostly offsetting a likely fall in energy prices.

Prices of goods imported into the US rose for a third month in April, led by gains in the cost of crude oil, Bloomberg said. Prices excluding fuels rose .2% for the month. The price of capital goods fell by the most in almost two years, which implies inflation will remain contained. Year-over-year import prices rose 1.9% versus a 2.6% gain in March. Prices of imported autos, parts and engines were unch. As well, prices of goods from China fell .1%. I suspect import prices have already peaked for the year and will trend lower over the intermediate-term.

First-time claims for jobless benefits unexpectedly dropped to a four-month low last week, signaling the companies are letting go of fewer workers, Bloomberg reported. The four-week moving-average of jobless claims fell to 317,250 from 328,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.