US trade deficit widens as exports decline

THE US trade deficit in goods widened modestly in February as exports declined, potentially setting up trade to be a small drag on economic growth in the first quarter.

The trade deficit increased 0.6 per cent to US$91.6 billion, the Commerce Department said on Tuesday (Mar 28). Economists polled by Reuters had forecast the goods trade deficit would be little changed at US$91 billion.

“Today’s results leave the average nominal goods shortfall for the first two months of this quarter at US$91.4 billion, which is roughly a billion dollars higher than the average for all the fourth quarter,” said Lou Crandall, chief economist at Wrightson ICAP in Brooklyn, New York.

“With the services surplus on track for a decline this quarter, net exports seem likely to exert a mild drag on the first-quarter GDP calculations after having added about half a percentage point to growth in the fourth quarter.”

Goods exports dropped 3.8 per cent to US$167.8 billion last month. The decline was led by an 11.9 per cent plunge in shipments of motor vehicles and parts. Exports of consumer goods decreased 4.6 per cent, while industrial supplies, which include petroleum, fell 4.2 per cent.

Exports of food and capital goods also fell. But exports of other goods rose 4.5 per cent.

Imports of goods slipped 2.3 per cent to US$259.5 billion. Imports of motor vehicles and parts tumbled 7.1 per cent, while those of consumer goods dropped 5.6 per cent. There were also decreases in imports of food and industrial supplies. But imports of capital goods as well as other goods increased.

Despite the overall decline in imports, businesses restocked goods at a steady clip in February.

The Commerce Department also reported that wholesale inventories rose 0.2 per cent in February after falling 0.5 per cent in January.

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US business activity accelerates in March: S&P Global survey

Stocks at retailers jumped 0.8 per cent after gaining 0.1 per cent in January. They were boosted by a 1.9 per cent acceleration in motor vehicle inventories, which followed a 0.4 per cent gain in January.

Excluding motor vehicles, retail inventories rose 0.4 per cent after being unchanged in January. This component goes into the calculation of gross domestic product.

A smaller trade deficit and the piling up of unsold goods at businesses were the contributors to the economy’s 2.7 per cent annualized growth rate in the fourth quarter. The Atlanta Federal Reserve early on Tuesday was forecasting that first-quarter GDP would increase at a 3.2 per cent pace. REUTERS