The US trade deficit narrowed unexpectedly in February while producer prices excluding volatile food and energy were unchanged in March, data showed today, suggesting the economy continued to chug along while inflation pressures remained muted.
The February trade gap fell to $58.4 billion, as crude oil imports fell sharply to the smallest in four years and average imported oil prices were the lowest since December 2005, a government report showed.
The Commerce Department also lowered its estimate of the January trade gap to $58.9 billion, from its previous estimate of $59.1 billion.
The midpoint estimate of Wall Street analysts surveyed before the report was for the February trade gap to widen slightly to $60.0 billion. The smaller-than-expected trade gap could prompt analysts to raise their estimates of first-quarter US economic growth.
Meanwhile, a Labour Department report showed that rising energy prices boosted overall producer prices in March by a greater-than-expected 1 per cent.
However, traders focused on the core rate, excluding food and energy, which was flat during March. "Although the producer price index rose a little bit, once you take energy prices out we are basically tame on the inflation side. We have slow growth with moderate inflation," said Albert Safdie, a global fixed-income trader at Hapoalim Securities in New York.
The Federal Reserve, which has identified inflation as its predominant concern about the US economy, "can breathe a little easier. It is not just that price relief is welcome this month, it was absolutely necessary," said Christopher Low, chief economist at FTN Financial at New York.
US Treasury debt prices and stock future prices traded higher after the data showed core producer prices were unchanged in March.
But the inflation figures and the smaller-than-expected trade gap had little impact on the dollar. Overall producer prices rose 3.2 per cent from March a year ago, the biggest climb since a 3.8 per cent 12-month gain to August 2006.
However, core producer prices rose 1.7 per cent from the same period 12 months ago, down from a 1.8 per cent year-over-year rise in February.