In February, the US trade deficit narrowed less than expected. The trade deficit shrank from an upwardly revised $47 billion to $45.8B, while a deficit of $44B was expected. Both imports and exports dropped, but the decline in imports (-1.7% M/M) was somewhat bigger than the drop in exports (-1.4% M/M). Weakness in both exports and imports was due to the automotive component. Excluding petroleum, the trade deficit narrowed from $20.05 billion to $19.94 billion. After net exports made a nice contribution to growth in the fourth quarter of 2010, these figures provide further evidence that net exports will put a drag on growth in the first quarter of 2010.
In March, the US NFIB Small business optimism indicator unexpectedly worsened. The headline index fell from 94.5 to 91.9, the lowest level since October last year, while the consensus was looking for a slight increase. The breakdown show a decline in plans to hire (2% from 5%), expect better economy (-5% from 9%), expect higher sales (6% from 14%), inventory satisfaction (-1 from 2%), good time to expand (5% from 7%) and positive earnings trends (-32% from -27%). Another remarkable fact was the sharp increase in easing of credit conditions which rose sharply from -10% to 24%. In the previous month’s small business optimism rose back to pre-crisis levels, but this outcome indicates that sentiment among small businesses remains fragile.