The Commerce Department reported Tuesday that the trade deficit fell 3.6 percent to $40.4 billion, while February’s deficit was revised to $41.9 billion from a previously reported $42.3 billion.
Economists polled by Reuters had forecast the trade deficit falling to $40.3 billion in March. When adjusted for inflation, the trade deficit dipped to $49.4 billion from $49.8 billion in February.
However, the amount the deficit narrowed off from the figure the government had assumed when it released advanced first-quarter gross domestic product estimates last week, which showed an abysmal .1 percent growth, meaning the economy likely contracted in the first three months of the year. Trade sliced off 0.83 percentage point from GDP growth in the first quarter.
The report is the latest piece of data suggesting the government will likely have to adjust downward its growth estimate to show a contraction when it released its revisions later this month. Last week, data showed spending on construction projects and factory inventories in March were also off the figures the government had assumed in its calculations. When factoring in the data, the economy contracted by roughly 0.4 percent rate in the first quarter.
The three-month moving average of the trade deficit, which is widely seen as a better indicator due to its avoidance of month-to-to month volatility, ticked up to $40.5 billion in the three months through the month of March from $40.0 billion in the prior three-month period.
Exports increased 2.1 percent to $193.9 billion, which is the the highest level since November.
Exports of capital goods, industrial supplies, materials and automobiles, all increased in the March. Exports of services hit a record high, while overall exports to Canada, South Korea and Germany were all at record highs.
Still, imports also increased by 1.1 percent to $234.3 billion in March, which is the highest level in two years and offset export gains. In March, considering the increases in food prices, it wasn’t a surprise food imports hit a record high, while other non-petroleum imports were measured at the highest on record.
Goods and services sold to China increased 9.6 percent, notable data after a report showed manufacturing in the world’s No. 2 economy slowed. Meanwhile, imports from China rose by only 1.6 percent.
The U.S. trade deficit with China was at $20.4 billion in March, slightly lower than the $20.9 billion measured in February.