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Investigating a Shocking Increase in the Trade Deficit and Economists' Blown Forecasts

The US registered its biggest goods trade deficit in history, by far. Let's take a look with three charts.
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Balance of Trade data from Census Department, chart by Mish

Balance of Trade data from Census Department, chart by Mish

The Census Department Advance Indicators show the trade deficit in goods increased a whopping 17.8 percent in April to the biggest deficit in history.

The overall trade deficit is a function of goods and services. The advance number is goods only. 

Goods and Services

The US tends to run a small surplus on the services side. In February, the services surplus was $18.3 billion. 

For details please see my April 5, 2022 post The US Goods and Services Trade Deficit Hovers Near Record Level

If that advance number is close to correct the US will easily blast to a record overall trade deficit. 

Advance Indicators 

  • Trade Deficit: +17.8% to $-125.3 Billion
  • Exports of goods for March were $169.3 billion, $11.4 billion more than February exports. Imports of goods for March were $294.6 billion, $30.3 billion more than February imports.
  • Advance Wholesale Inventories: +2.3% to $837.7 Billion
  • Advance Retail Inventories: +2.0% to $670.6 Billion

Economists estimates missed wildly.

Economists Predictions 

  • Trade: $-105.0 billion (an improvement) vs $-125.3 billion actual 
  • Wholesale Inventories +1.4% vs 2.3% actual with February revised from +2.1% to +2.6% making a big effective miss
  • Retail Inventories: No estimates

The above are consensus estimates from Bloomberg Econoday. 

Month-to-Month Change

Balance of Trade data from Census Department, calculation and chart by Mish

Balance of Trade data from Census Department, calculation and chart by Mish

The overall goods change was -107.47 billion to -125.32 billion. The deficit jumped by 17.9 billion, the biggest move in any direction in history.

Month-to-Month Change Detail 

Balance of Trade data from Census Department, calculation and chart by Mish

Balance of Trade data from Census Department, calculation and chart by Mish

Honing in, we have a better feel for the magnitude of the change. 

Whereas the 14.1 billion jump in 2021 was preceded by a 8.8 billion decline, the 18.8 billion deficit increase came vs a small $1.1 billion improvement in February.

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Trade Deficits and Recessions

US trade deficits tend to shrink in recessions as noted by the huge cluster of improving trade balances at the left of my chart. 

This happens because the US is the consumer of last resort. When US consumers throw in the towel for months on end, a global recession results. 

So, if and when the trade deficit improves, don't expect a lot of economic cheering. 

Significant Change in 2022 Q1 GDPNow Forecast and We Find Out Tomorrow

Earlier today I noted Significant Change in 2022 Q1 GDPNow Forecast and We Find Out Tomorrow

The top line forecast did not change from +0.4% but real final sales (the bottom line important GDP number) changed from 1.6% to 0..9%.

In the last week estimates plunges from 2.6% to 0.9%. 

Looking Ahead

Looking ahead, Expect More Stock Market Pain Because It's Coming

I see massive demand destruction on top of plunging home sales with mortgage rates now well above five percent.

So, forget about a soft landing.

The correct question is What's the Shape of the Hard Landing?

And where will stocks be? How many hikes do you see now?

This post originated at MishTalk.Com.

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