The trade balance on goods only (now being released before the complete goods and services trade deficit) saw a deficit of $64.8b in February which was $1.6b less than expected and January was revised down slightly. The fall in the deficit though was not for the right reasons as exports fell by .1% m/o/m and imports were down by 2.1%. Imports of auto’s fell by 8.3% m/o/m and there was an almost 6% drop in the imports of consumer goods. As for exports, I still believe that global trade has bottomed out and looking at the y/o/y gain of 6.7% gives some perspective on this.
The first look at February wholesale inventories saw a gain of .4% m/o/m, twice the estimate of up .2% while January was revised down by one tenth. With respect to retail inventories, they grew by .4% after a .9% rise in January. Of note has been the sharp rise in inventories sitting on car dealer lots. Inventories at motor vehicle/parts dealers in February was higher by 1.5% m/o/m after a 2% gain in January. The increase versus February last year was 9.5%. This helps to explain the 10% y/o/y increase in auto maker incentives in February needed to move these cars off the lots. Combine this with the rising delinquency rate for subprime borrowers and the now falling value of used cars makes it clear that the car business is now more challenged. This of course was the bright spot area since the last recession.
As a result of both data points, we will likely see an increase in Q1 GDP estimates but it’s not a high quality raise.