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Fundamental Analysis

International Trade Balance

Definition International Trade measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

ImportanceInternational trade is the major indicator for foreign trade.

Why do Investors Care?Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. Furthermore, the data can directly impact all the financial markets, but especially the foreign exchange value of the dollar.

Imports indicate demand for foreign goods and services here in the U.S. Exports show the demand for U.S. goods in overseas countries. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.

Interpretation Market reaction to this report is complex. Typically, the smaller the trade deficit, the more bullish for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market.
Both the level and changes in the level of international trade indicate relevant information about the trends in foreign trade. Like most economic indicators, the trade balance is subject to substantial monthly variability, especially when oil prices change. It is more appropriate to follow either three-month or 12-month moving averages of the monthly levels.

Fundamental Analysis

	Introduction
	Jobless Claims
	Durable Goods Orders
	Employment Data
	Gross Domestic Product
	Housing Starts
	FOMC Meeting
	ISM Manufacturing Index
	Personal Income And Outlays
	Producer Price Index
	Retail Sales
	Beige Book
	International Trade Balance
	Consumer Confidence
	Current Account
	Leading Indicators
	Market Moving Economic Data

Frequency Monthly.

SourceBureau of Economic Analysis and Bureau of the Census; U.S. Department of Commerce.

Availability Around mid-month.

Coverage Data are for two months back. (Data for June are released in August.)

Revisions Monthly, data for the prior three months are revised to reflect more complete information. The magnitude of the revision is typically small.

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