Soaring Oil Blasts the Trade Deficit

The trade numbers are out for March, and higher oil prices are widening out the trade deficit. Today’s trade report shows that exports rose by 4.6% in March to $172.7 billion. That’s the biggest gain since March 1994.

The trade gap rose 6 percent to $48.2 billion, the biggest since June, from $45.4 billion in February, the Commerce Department reported today in Washington. The median forecast of 72 economists surveyed by Bloomberg News projected it would widen to $47 billion. Sales abroad climbed by the most in 17 years.

Crude oil costs that surged above $100 a barrel for the first time in more than a year and a 9.4 percent drop in the dollar will probably keep driving up the cost of imports. At the same time, the weaker currency is making American goods more competitive to customers in emerging markets from Argentina to China, benefiting manufacturers like United Technologies Corp. (UTX) and Caterpillar Inc. (CAT).

The original report for Q1 GDP growth was 1.8%. Today’s report indicates that an upcoming revision may be slightly lower.

Four years ago, I looked at the impact of the euro on U.S. equity markets. The lesson is that a weaker euro is very good for our stocks. The biggest beneficiaries of a weak euro were tech, industrials and consumer discretionaries.

Posted by on May 11th, 2011 at 10:19 am


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