by Calculated Risk on 5/12/2006 10:56:00 AM

From the AP: Trade Deficit Declines for 2nd Month

The Commerce Department reported Friday that the gap between what the country sells abroad and what it imports narrowed to $62 billion in March, the smallest deficit in seven months. It was a 5.5 percent improvement from February's $65.6 billion deficit which in turn had fallen from the all-time high of $68.6 billion set in January.

Click on graph for larger image.

This graph shows the long term downward trend. Its too soon to argue a trend change, but this month's report definitely surprised me - mostly because import traffic was very strong at the West Coast ports. I will need to look through the numbers this weekend.

For some excellent analysis, see Brad Setser: Not quite as good as they look

Last December I suggested the trade deficit might stabilize, but that prediction was based on a slowing US economy. And the US economy hasn't slowed yet.