US goods trade deficit widens in January; wholesale inventories decline

Published Tue, Feb 28, 2023 · 11:25 PM

THE US trade deficit in goods increased moderately in January, with both imports and exports rising solidly, leaving trade on track to have little or no impact on gross domestic product (GDP) growth early in the first quarter.

The goods trade deficit widened 2.0 per cent to US$91.5 billion, the Commerce Department said on Tuesday (Feb 28). This left the goods trade deficit slightly above the fourth-quarter average.

“Trade will probably be starting out the first quarter on track to make a roughly neutral contribution (to GDP),” said Lou Crandall, chief economist at Wrightson ICAP.

Goods imports increased 3.4 per cent to US$265.3 billion. Motor vehicle imports surged 9.0 per cent while imports of consumer goods jumped 6.4 per cent. There were also increases in imports of food and capital goods. But imports of industrial supplies, which include crude oil, fell as did those of other goods.

Exports of goods shot up 4.2 per cent to US$173.8 billion, boosted by a 14.8 per cent jump in consumer goods. Motor vehicle exports accelerated 8.2 per cent. Exports of capital goods and food also increased strongly. Shipments of industrial supplies, however, rose moderately and exports of other goods fell.

A smaller trade deficit was one of the contributors to the economy’s 2.7 per cent annualised growth pace in the fourth quarter. The other boost to growth came from inventories.

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There are, however, signs that inventories could be a drag on GDP growth this quarter as businesses either liquidate unwanted goods or hold back placing large orders for merchandise amid fears of a recession this year.

The so-called advance indicators report from the Commerce Department on Tuesday also showed wholesale inventories falling 0.4 per cent last month after gaining 0.1 per cent in December, reflecting drops in both durable and nondurable goods.

Stocks at retailers rose 0.3 per cent after increasing 0.4 per cent in December. Motor vehicle inventories climbed 0.6 per cent after advancing 1.4 per cent in December. Excluding motor vehicles, retail inventories rose 0.2 per cent after gaining 0.1 per cent in December. This component goes into the calculation of GDP.

Growth estimates for the first quarter are currently as high as a 2.8 per cent annualised rate, largely thanks to strong consumer spending and factory production. REUTERS

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