US goods trade deficit narrows in February; still close to record highs

Stacked shipping containers and cranes are pictured at the Port of Los Angeles in Los Angeles, California, U.S. November 22, 2021. REUTERS/Mike Blake

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  • The goods trade deficit falls 0.9% in February
  • Retail inventories increase 1.1%; wholesale up to 2.1%

WASHINGTON, March 28 (Reuters) – The U.S. goods trade deficit narrowed in February, but the drop reversed only a fraction of the rise to an all-time high in January, suggesting trade will again weigh on economic growth. in the first trimester.

Although the Commerce Department’s leading indicators report on Monday showed that businesses continued to replenish last month, the pace has slowed from late 2021, implying that there would also likely be no contribution to gross domestic product growth from investment in Inventory.

“We think trade could subtract two to three percentage points from GDP growth in the first quarter,” said Daniel Silver, an economist at JPMorgan in New York. “While the real change in inventories seems likely to us to be strong again, it may end up being comparable to the large increase reported for the fourth quarter and therefore inventories could be quite close to a neutral factor for growth in the GDP in the first quarter.”

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Last month’s trade deficit fell 0.9% to $106.6 billion, the Commerce Department said on Monday. The goods trade deficit reached an all-time high of $107.6 billion in January.

Exports increased 1.2% to 157.2 billion dollars. Economists believe that exports, which were not adjusted for inflation, were helped by higher prices rather than larger volumes. A blockade of US-Canada border crossings by Canadian truckers last month likely reduced export volumes.

The government will release the full February trade report, which will include country data, next Tuesday.

Last month’s rise in goods exports was led by a 6.3% increase in shipments of consumer goods. Food exports accelerated by 3.6%, while industrial supplies increased by 2.6%. However, motor vehicle exports fell 3.4% as production continued to be hampered by a global shortage of semiconductors. There were also substantial falls in exports of capital goods and other goods.

Balance of trade


Goods imports increased 0.3% to $263.7 billion. They were held back by a 9.9% decline in motor vehicle imports, as well as a 3.0% drop in food imports. But there were strong increases in imports of industrial inputs and other goods.

Capital goods imports also increased, as did consumer goods, pointing to strong spending by businesses and consumers. Trade has subtracted from gross domestic product growth for six consecutive quarters. A shift in spending from services to goods during the COVID-19 pandemic led to a boom in imports as domestic manufacturers struggled with tangled supply chains.

A resurgence of coronavirus infections in China and Russia’s war against Ukraine could worsen supply constraints.

“The strong economic recovery in the US from the pandemic has supported imports, while a relatively slower global economic recovery has weighed on exports,” said Abbey Omodunbi, senior economist at PNC Financial in Pittsburgh, Pennsylvania.

“The outlook for goods trade is cloudy. Further closures in Shanghai and heightened uncertainty from the Russia-Ukraine crisis will weigh on US exports.”

Businesses continued to replenish inventories in February, although the pace was less frenetic than late last year. Wholesale inventories rose 2.1% after climbing 1.1% in January. Retail inventories increased 1.1% in February after advancing 1.9% in January.

Motor vehicle inventories gained 0.9% after rising 2.5% in January. Excluding motor vehicles, retail inventories rose 1.2% after accelerating 1.7% in January. This component enters into the calculation of GDP growth.

Inventory investment accelerated to a strong seasonally adjusted annualized rate of $171.2 billion in the fourth quarter, contributing 4.90 percentage points to the quarter’s 7.0% growth pace.

Despite February’s strong rise, inventories are likely to be neutral to GDP growth this quarter as they would need to rise at a faster pace than in the fourth quarter to contribute to growth. First quarter GDP growth estimates are mostly below a 1.0% pace.

Some economists believe that the pace of inventory investment is enough to contribute to GDP growth this year.

“These strong levels are broadly consistent with our view that inventory investment will provide strong support for GDP this year, with inventories remaining very low relative to sales after being drawn down in earlier stages of the pandemic.” said Jonathan Millar, an economist at Barclays in New York.

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Information from Lucía Mutikani; Edited by John Stonestreet and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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