by Calculated Risk on 4/13/2007 11:55:00 AM

The Census Bureau reported today for February 2007:

"a goods and services deficit of $58.4 billion, compared with $58.9 billion in January"

Click on graph for larger image.
The red line is the trade deficit excluding petroleum products. (Blue is the total deficit, and black is the petroleum deficit).

Looking at the trade balance, excluding petroleum products, the deficit has been declining slightly since peaking in the second half of 2005.

The trade deficit, ex-petroleum, appears to have peaked at about the same time as Mortgage Equity Withdrawal in the U.S.

"Interestingly, the change in U.S. home mortgage debt over the past half-century correlates significantly with our current account deficit. To be sure, correlation is not causation, and there have been many influences on both mortgage debt and the current account."
Alan Greenspan, Feb, 2005

Also notice the prior time period when the trade deficit declined slightly - right after the deficit peaked towards the end of 2000, and right before the recession of 2001.

For much more, see Brad Setser's: The February trade data

On the surface, the February trade data doesn't seem to tell us much. The $58.4b February trade deficit is a tad smaller than the $58.9b January deficit, but the overall story is the same: the trade deficit seems to have stabilized at around $60b a month, $720b for the year. A $720b trade deficit still implies - if I am right about the income balance -- a $850b plus current account deficit.

Scratch the surface, though, and I think three stories emerge from the data:

1. US export growth looks to be slowing

2. The improvement on the import from oil isn't going to last, and non-oil imports are still growing -- albeit a rather modest pace.

3. Europe is doing its part to support global rebalancing, Asia isn't.