Yesterday was a lousy day in the market. First, the world over-reacted to the news that Japanese nuclear disaster was worse than previously admitted. Then, Goldman Sachs said it was time to sell oil, as the economy was weakening. So, we all lost a little money yesterday.
But another report was lost in the hysterics. The trade deficit fell 2.6% to $45.8 billion in February. This is normally a good thing. Imports become more expensive when the dollar falls, as it has been. As expected, we therefore imported 1.7% less. The two biggest reasons were that fewer cars and less oil was imported.
The mystery is why did our exports drop 1.4%. With a weaker dollar, our exports should have risen. The decrease was pretty much across-the-board, with drops in U.S. auto, auto parts, capital goods, semiconductors, industrial engines, oilfield drilling equipment and even farm products. But, the report did not speculate on world demand falling, and that would be a bad thing indeed.
So, reducing the trade deficit is good news, but why did exports fall as the dollar weakened? I'll be watching this closely.
And, just for your infomation, our deficit with China decreased 19% and with Canada by 23.8%. At the same time, our deficit with Europe rose 23.7%, which reflects the Euro's weakness back in February.
