WASHINGTON (Reuters) – The U.S. trade deficit narrowed sharply in March as exports increased to a record high amid a surge in deliveries of commercial aircraft and soybeans, bolstering the economy’s outlook heading into the second quarter.
While other data on Thursday showed a modest increase in new applications for jobless benefits last week, the number of Americans receiving unemployment aid fell to its lowest level since 1973, pointing to tightening labor market conditions.
Wage growth is also rising, with hourly compensation accelerating in the first quarter. That should help to boost consumers spending after it slowed sharply in the first three months of the year.
The Commerce Department said the trade deficit tumbled 15.2 percent to $49.0 billion in March, the lowest level since September. The trade gap widened to $57.7 billion in February, which was the highest level since October 2008.
March’s decline ended six straight monthly increases in the trade deficit. Economists polled by Reuters had forecast the trade gap narrowing to $50.0 billion in March.
The politically sensitive goods trade deficit with China dropped 11.6 percent to $25.9 billion, which will probably do little to ease tensions between the United States and China.
U.S. President Donald Trump has threatened tariffs on up to $150 billion worth of Chinese goods to punish Beijing over its joint-venture requirements and other policies Washington says force American companies to surrender their intellectual property to state-backed Chinese competitors.
China, which denies it coerces such technology transfers, has threatened retaliation in equal measure, including tariffs on U.S. soybeans and aircraft. A U.S. trade delegation arrived in China on Thursday for trade talks.
Trump, who claims the United States is being taken advantage of by its trading partners, has already imposed broad tariffs on imported solar panels and large washing machines. He recently slapped 25 percent import duties on steel and 10 percent on aluminum.
The Trump administration argues that the perennial trade deficit is holding back economic growth. The government reported last week that trade contributed 0.20 percentage point to the first quarter’s 2.3 percent annualized growth pace. The economy grew at a 2.9 percent rate in the fourth quarter.
Prospects for the economy are brightening. In a separate report, the Labor Department said initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 211,000 for the week ended April 28.
Claims remained near a more than 48-year low of 209,000 touched during the week ended April 21. The labor market is considered to be near or at full employment. The unemployment rate is at a 17-year low of 4.1 percent, close to the Federal Reserve’s forecast of 3.8 percent by the end of this year.
The U.S. central bank on Wednesday left interest rates unchanged. The Fed said policymakers expected “economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.”
The number of people receiving benefits after an initial week of aid dropped 77,000 to 1.76 million in the week ended April 21, the lowest level since December 1973. With labor conditions tightening, wage growth is picking up.
A second report from the Labor Department showed hourly worker compensation accelerated at a 3.4 percent rate in the first quarter after rising at a 2.4 percent pace in the October-December period. It increased at a 2.5 percent rate compared to the first quarter of 2017.
Prices for U.S. Treasuries were trading higher, while the dollar was little changed against a basket of currencies. U.S. stock index futures were slightly lower.
In March, exports of goods and services increased 2.0 percent to an all-time high of $208.5 billion, lifted by a $1.9 billion increase in shipments of commercial aircraft. There were also increases in exports of soybeans, corn and crude oil. Real goods exports were the highest on record.
Exports to China jumped 26.3 percent in March.
Imports of goods and services fell 1.8 percent to $257.5 billion, in part as the boost from royalties and broadcast license fees related to the Winter Olympics faded. Imports of capital goods fell by $1.5 billion, weighed down by declines in imports of computer accessories, telecommunications equipment and semiconductors.
Imports of consumer goods decreased by $0.9 billion. Crude oil imports dropped by $0.5 billion in March. Imports from China fell 2.1 percent.
Reporting By Lucia Mutikani; Editing by Andrea Ricci