US trade deficit widens in February on strong imports

THE US’ trade deficit widened for a second straight month in February as an increase in exports to a record high was offset by surging imports, suggesting trade could be a drag on economic growth in the first quarter.

The trade deficit increased 1.9 per cent to US$68.9 billion, the Commerce Department’s Bureau of Economic Analysis said on Thursday (Apr 4). Data for January was revised slightly to show the trade gap rising to US$67.6 billion instead of US$67.4 billion as previously reported. Economists polled by Reuters had forecast the deficit little changed at US$67.3 billion in February.

When adjusted for inflation, the goods trade deficit increased 1.2 per cent to US$87.0 billion in February.

Most of the imported goods will likely end up as inventories, which could offset the anticipated hit on gross domestic product from the widening trade gap.

Trade added 0.25 percentage point to the economy’s 3.4 per cent annualised growth rate in the fourth quarter of 2023, after being neutral for two straight quarters. Growth estimates for the first quarter are currently as high as a 2.8 per cent pace.

Exports jumped 2.3 per cent to an all-time high of US$263.0 billion. Goods exports accelerated 2.9 per cent to US$176.7 billion. There were increases in exports of industrial supplies and materials, which include crude oil. Food exports rose by US$1.7 billion, boosted by soya beans. Capital goods exports increased US$1.5 billion to a record-high US$53.0 billion, amid a rise in civilian aircraft.

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But exports of motor vehicles, parts and engines decreased to US$1.3 billion. Exports of services rose US$0.8 billion to an all-time high of US$86.4 billion, lifted by travel and transport.

Imports advanced 2.2 per cent to US$331.9 billion in February, the highest level since October 2022. Goods imports shot up 1.8 per cent to US$268.1 billion. There were increases in imports of consumer goods, food as well as motor vehicles, parts and engines. Services imports rose US$2.4 billion to a record US$63.8 billion.