Rising Import Prices Cut Trade Deficit

The U.S. trade deficit improved 3.2% in February as the balance of services improved, goods exports rose 1.1% and goods imports fell 0.2%, according to the Department of Commerce.

Capital goods accounted for most of the export gain.
Import prices rose 0.5% in spite of a 1.8% drop in petroleum prices and continued small declines in the price of technology imports from Asia. This means that the prices of other goods have begun to rise quickly under pressure from the recent weakness in the U.S. dollar.
Overall, this means that the volume of goods imports likely to be moved by truck fell sharply in February, according to Jim Haughey, Newport Communications' senior economist. This is no surprise since February was already known to be a very weak month.
The next trade report will show a small export volume gain in the 0.0-0.5% range, but import volume, excluding energy, may decline slightly. Rising import volume should return in the spring with the improving economy, but expect monthly gains to average only a meager 0.3-0.5% as non-energy import price inflation picks up with further declines in the dollar.