Importance
International trade is the major indicator for foreign trade. While the trade balance (deficit) is small relative to the size of the economy, changes in the trade balance can be quite substantial relative to changes in economic output from one quarter to the next. Measured separately, imports and exports are important components of aggregate economic activity, representing approximately 16 and 12 percent of GDP, respectively.

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.

It is also useful to examine the trend growth rates for exports and imports separately because they can deviate significantly. Trends in export activity reflect both the competitive position of American industry and the strength of domestic and foreign economic activity. U.S. exports will grow when: 1) U.S. product prices are lower than foreign product prices; 2) the value of the dollar is relatively weaker than that of foreign currencies; 3) foreign economies are growing rapidly.

Imports will increase when: 1) foreign product prices are lower than prices of domestically-produced goods; 2) the value of the dollar is stronger than that of other currencies; 3) domestic demand for goods and services is robust. One major benefit of healthy import demand in the mid-1990s was that imports helped to alleviate inflationary pressures in the United States.

Frequency
Monthly.

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

Availability
Around mid-month.

Coverarge
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. Annually, new seasonal adjustment factors are introduced in July with the release of June data. This revision affects at least three years of data. The magnitude of the revision is typically small.