Unexpected Growth in U.S. Trade Deficit

April 16, 2008

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You might think that with U.S. consumers buying less, the deficit would fall. Yet the trade gap in U.S. unexpectedly widened for the month of February, according to the latest numbers from the Commerce Department.

Looking at both goods and services, total February exports of $151.4 billion and imports of $213.7 billion resulted in a goods and services deficit of $62.3 billion, up from $59.0 billion in January, according to latest trade numbers, released by the United States Department of Commerce last week.

February exports were $3.0 billion more than January exports of $148.4 billion, while February imports were $6.3 billion more than January imports of $207.3 billion.

In February, the goods and services deficit increased $4.1 billion from February 2007. Exports were up $26.1 billion, or 20.8 percent, and imports were up $30.2 billion, or 16.4 percent.

Goods and Services Moving Average For the three months ending in February, exports of goods and services averaged $148.5 billion, while imports of goods and services averaged $208.2 billion, resulting in an average trade deficit of $59.7 billion. For the three months ending in January, the average trade deficit was $59.7 billion, reflecting average exports of $146.0 billion and average imports of $205.7 billion.

Goods Only In February, the goods deficit increased to $72.9 billion, from $3.5 billion in January. Exports of goods increased $2.6 billion to $107.3 billion, and imports of goods increased $6.0 billion to $180.2 billion.

Exports The January-to-February change in exports of goods reflected increases in industrial supplies and materials ($1.9 billion); foods, feeds and beverages ($0.7 billion); other goods ($0.6 billion) and automotive vehicles, parts and engines ($0.4 billion).

Decreases occurred in capital goods ($0.7 billion) and consumer goods ($0.1 billion).

From February 2007 to February 2008, the one-year change in exports of goods mirrored hikes in industrial supplies and materials ($8.0 billion); capital goods ($4.2 billion); foods, feeds and beverages ($3.0 billion); consumer goods ($1.8 billion); automotive vehicles, parts and engines ($1.4 billion) and other goods ($0.5 billion).

Imports The January-to-February change in imports of goods echoed growth in consumer goods ($2.2 billion); automotive vehicles, parts and engines ($1.8 billion); capital goods ($1.0 billion); foods, feeds and beverages ($0.1 billion); industrial supplies and materials ($0.1 billion) and other goods ($0.1 billion).

From February 2007 to February 2008, the one-year change in imports of goods reflected increases in industrial supplies and materials ($19.5 billion); capital goods ($1.9 billion); automotive vehicles, parts, and engines ($1.5 billion); consumer goods ($1.3 billion); foods, feeds and beverages ($0.6 billion) and other goods ($0.1 billion).

What's To Come Many economists — including those at the Federal Reserve — have said that demand from foreign customers has propped up the ailing American economy, keeping many businesses afloat even as the housing slump and a weakening job market dampen domestic demand. "If imports outpace exports, that means more money may be moving out of American businesses than coming in," notes The New York Times.

However, economists have said the deficit would probably narrow in coming months.

A report from All Headline News echoes this sentiment, pointing to market analysts who say the deficit is "likely to fall during 2008 due to several factors," including diminishing consumer confidence as the dollar weakens against major international currencies while oil prices continue to hit new records."

"Growth is so weak we are not going to be buying as much," a global economist at Wachovia Corp. told Bloomberg News. "We'll see the trade deficit improving."

ResourcesU.S. International Trade in Goods and Services February 2008 U.S. Bureau of Economic Analysis, April 10, 2008

U.S. Trade Deficit Grows Unexpectedly by Michael M. Grynbaum The New York Times, April 10, 2008

U.S. Trade Deficit Grows Unexpectedly By 5.7pct by Mayur Pahilajani All Headline News, April 10, 2008

U.S. Economy: Trade Gap Unexpectedly Grew on Imports by Shobhana Chandra Bloomberg News, April 10, 2008

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