PNC economist Abbey Omodunbi


The goods trade deficit widened in March to $125.3 billion, the largest deficit on record, from $106.3 billion in February, according to the advance estimate from the Census Bureau.

The value of nominal goods exports rose 7.2% to $169.3 billion, while nominal goods imports jumped 11.5% to $294.6 billion.

Trade has been a drag on GDP growth for six straight quarters and was likely a major drag on growth in the first quarter of this year.

The advance nominal-goods trade deficit widened by 17.8% in March to $125.3 billion from $106.3 billion in February. This was against consensus expectations for a narrowing of the trade deficit. Nominal goods exports rose 7.2% on the month to $169.6 billion, while nominal goods imports increased 11.5% to $294.6 billion.

Industrial supplies exports, the largest category in March, rose 12.3% on the month after increasing by 3.0% in February. Food and beverages exports were up 4.7% in March following a 4.6% increase in February. Automotive vehicle exports rose 8.4%, more than reversing the 2.3% decline in February. Capital goods exports rose 1.7% on the month following a 1.5% decline in February.

Industrial supplies imports led the way for nominal goods imports, jumping 15.0% on the month following a 5.5% increase in February. Industrial supplies imports were up 48% from a year ago. Consumer goods imports, the largest category in March, jumped 13.6% following a small 0.7% increase in February. Automotive vehicles imports rose 12.0% following a 9.9% decline in February.

The trade deficit has widened to record levels during the pandemic as the consumer-led economic recovery in the U.S. has been a major driver of global economic growth. A shift in consumer spending patterns away from services toward durable goods has driven strong imports while global supply-chain disruptions and a slower economic recovery in many other countries have weighed on exports. The near-term trade outlook is cloudy.

Lockdowns in China and increased risks from the Russia-Ukraine crisis will weigh on trade. The advance nominal goods report also showed the value of wholesale inventories increased 2.3% while retail inventories were up 2.0%. This and the 48% year-over-year increase in industrial supplies imports could suggest an improvement in supply-chain disruptions that have contributed to the worst inflation in 40 years.

The first estimate of Q1 real GDP will be released April 28. PNC expects a modest 1% annualized growth in the first quarter; trade and inventories were likely major drags while consumer spending and residential investment likely added to growth.

House prices climb higher in February

House price appreciation in February, as measured by the S&P CoreLogic Case-Shiller 20-City Composite Index accelerated to 20.2% from 19.0% in January.

The S&P CoreLogic Case-Shiller National Composite Index recorded a 19.8% gain in February from a year ago. This was the third-highest reading on record. House prices, as measured by the National Composite Index are now an astounding 57% higher than the 2006 peak before the Great Recession started. Prices were up in February from the prior month in all 20 cities.

The strongest gains from the prior month were in San Diego (3.6%), Seattle (3.5%) and Los Angeles (3.2%). The weakest gains from the prior month were in Cleveland (1.3%), New York (1.2%) and Minneapolis (1.2%).

Phoenix (32.9%), Tampa (32.6%) and Miami (29.7%) reported the strongest year-over-year gains again among the 20 cities in January. Phoenix led all cities for the 33 consecutive month. New York (13.0%), Minneapolis (12.0%) and Washington DC (11.9%) had the weakest gains.

House prices continued their climb in February owing to resilient demand and constrained inventories. However, house price growth will slow this year as mortgage rates increase and inventories improve. More recent data suggest that housing demand is slowing.

The Mortgage Bankers Association (MBA) Market Index, which tracks mortgage applications, fell 5% in the week ended April 15, pushing the index to the lowest level since early 2019. This was the sixth-straight week of reduced mortgage applications as mortgage rates have increased to new decade highs. The housing market remains undersupplied, and it will be a sellers’ market for some time, but demand should soften with rising mortgage rates, reducing the demand-supply imbalance.

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