The latest monthly trade balance figures from the United States will be coming out later today. According to the median estimates, economists are forecasting that the US trade deficit will rebound in February.
Estimates show that the trade deficit will rise to $53.5 billion for the month. This follows January’s data where the trade deficit shrank to %51.1 billion. It was a decline that was unexpected.
The overall trade deficit fell 14.6% on the year and was the sharpest decline since March 2018. While this brought some excitement to the markets, the expectations of a rebound in the trade deficit widening could however keep the sentiment in check.
The trade deficit data comes as the United States and China continue the negotiations on the trade deal. So far, given the fact that the deadline was extended, the markets are of the view that both countries will agree to a trade deal.
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But another decline in the trade deficit could see President Trump commenting on the figures and the need to close a deal with China as early as possible.
How Did China’s Trade Balance Perform?
Recent data from China revealed that exports rebounded in March. Exports rose 14.2% on a year over year basis in March 2019. This came after February’s exports fell 20.8%. The data beat the median estimates from economists.
At the same time, imports fell 7.6% in annual terms. This was a second consecutive decline after imports fell 5.2% in February. The rise in exports and the slump in imports sawChina’s trade balance rising from a deficit of $5.8 billion to a surplus of $32.6 billion in March.
It is possible that this rebound in the trade deficit figures will eat into the trade deficit figures from the United States.
Will the Eurozone Post a Surplus Again?
The US trade deficit figures could be further hit if the trade balance figures from eurozone show continuous strength. The data is due to come out a day later. But, in January, the eurozone trade balance figures saw a surprise surplus.
The EU’s trade surplus with the United States increased from 10.1 billion euro in December to 11.5 billion in January. If this trend continues, we could see the US trade deficit figures taking a larger hit.
This could lead to President Trump once again threatening the EU with tariffs. In recent week, the Washington administration was threatening the EU by imposing higher tariffs on automobile imports from the region.
The EU has not retaliated to the threats but could take the US to the WTO tribunal.
Trade Balance Figures and Q1 GDP
The trade figures will be contributing to the GDP forecasting tools. As a result, a weak dataset could shave off a few points from the Q1 GDP trackers.
At the time of writing, the median estimate range for the first quarter GDP for 2019 sits between 1.4% to 2.3% based on various forward-looking GDP tracking tools.
The markets are expecting growth to slow in the first quarter of the year.
This marks a second consecutive quarter where growth in the United States is slower. In the fourth quarter of 2018, the US GDP growth registered a rate of 2.6% on an annual basis.
This was a slower pace of increase compared to the 3.4% GDP growth rate that was seen during the second quarter of last year.
The slowdown in the GDP growth falls in line with the general theme of the Fed holding off from further rate hikes. The central bank has also stopped its balance sheet unwinding program.
President Trump has been calling for the Fed to cut rates, blaming the slowdown in the economy on the Fed’s policies. However, the trend among Fed officials is starting to shift once again.
Just last week, the Fed minutes revealed that members were open to raising rates if the economic data improves. Thus, it ruled out the fact that the Fed would not be hiking rates any more for the remainder of the year.