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The trade deficit widened in February for the third consecutive month. The U.S. trade deficit in goods and services rose to a seasonally adjusted $68.9 billion, from a revised $67.6 billion in January — the largest deficit in a year. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells overseas. The widening in February from the previous month came amid a jump in exports and a strong increase in imports. The deficit has widened five times in the past six months. By contrast, it narrowed sharply throughout 2022 and in the first half of last year.
Exports recorded their largest gain in a year. Total exports rose 2.3% from the previous month. Exports of foods, feeds, beverages and industrial supplies rose sharply during the month, but exports of autos and parts fell 8.5%. Exports of capital goods rose modestly while consumer goods were flat. Exports of services rose to a record high of $86.4 billion, supported by travel and freight transportation services. The U.S. dollar has rallied since the end of December, which will impact export growth in the months ahead since a stronger dollar makes U.S. goods more expensive to buyers paying in foreign currencies. With most of the country’s major trading partners struggling to generate much economic growth, the outlook for exports remains weak despite the strong increase in February.
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Imports are rising as domestic demand continues to normalize. Total imports rose 2.2% in February from the previous month. Imports of foods, feeds and beverages rose 7.6%, while imports of capital goods and consumer goods rose 2.6%. Imports of services rose $2.4 billion to a record $63.8 billion, causing the customary U.S. trade surplus in services to fall to $22.5 billion in February. The recent strength in imports suggests domestic goods demand is normalizing after a relatively weak year for capital expenditures and durable goods consumption.
Trade’s net contribution to GDP growth in the first quarter will likely be negative, based on February’s data. A rebound in exports in March, however, could counteract recent import strength and thus lessen the negative impact in the first quarter. Looking ahead, trade’s contribution to GDP growth will likely moderate in the first half of 2024, as weak economic growth across the world dampens the demand for U.S. exports.
Source: Department of Commerce, Trade Data
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