Trade Deficit Narrowed in March Amid Lagging Productivity and Rising Labor Costs

(CN) – The U.S. trade deficit narrowed in March to its lowest level since before the November election, but in the meantime, the nation’s trade gap with China continues to soar. In a separate report, the government on Thursday said worker productivity was down in March, while labor costs rose.

The Commerce Department reported Thursday that the trade deficit for goods and services declined to $43.7 billion, down from $43.8 billion in February.

Exports declined 0.9 percent in March to $191 billion, due mostly to a slowdown in auto exports. Imports fell 0.7 percent during the month, to $234.7 billion.

The government attributed that decline to slower crude oil and other petroleum imports.

To date in 2017, the trade deficit has risen 7 percent to $135.6 billion.

The politically-sensitive trade deficit with China rose 7 percent in March, climbing to $24.6 billion from $23 billion in February.

The surge was led by rising imports of Chinese cellphones and telecommunications equipment.

The trade deficit with the European Union rose 19 percent to $11.2 billion in March, while the deficit with Mexico notched up 22 percent to $7 billion.

In a separate report, the government said the productivity of American workers fell in the first quarter by the sharpest amount in a year, while labor costs increased.

The Labor Department said Thursday that productivity declined at an annual rate of 0.6 percent in the January-March quarter after rising at a 1.8 percent rate in the fourth quarter of 2016.

It was the biggest decline since a 0.7 percent rate of decline in the first quarter of last year.

Labor costs rose at a 3 percent rate, up from a 1.3 percent rate of increase in the fourth quarter, the report said.

Productivity, the amount of output per hour of work, has been weak through most of the current recovery.

Since 2007, increases have averaged just 1.2 percent — less than half the 2.6 percent average annual gains turned in from 2000 to 2007, when the country was benefiting from increased efficiency from greater integration of computers and the internet into the workplace.

Many analysts believe it is the biggest economic challenge facing the country, but there is no consensus on the cause of the slowdown.

The Associated Press contributed to this report.

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