Trade Will Likely Be a Drag on Growth in the First Quarter

• The goods trade deficit narrowed slightly in February to $106.6 billion, the second-widest balance on record, from $107.6 billion in January, according to the advance estimate from the Census Bureau.
• The value of nominal goods exports rose 1.2% to $157.2 billion, while nominal goods imports rose slightly by 0.3% to $263.7 billion.
• Trade has been a drag on GDP growth for six straight quarters and will likely be a drag on growth again in the first quarter of this year.

The advance nominal-goods trade deficit narrowed by 0.9% in February to $106.6 billion from $107.6 billion in January. Nominal goods exports rose 1.2% on the month to $157.2 billion, while nominal goods imports edged up 0.3% to $263.7 billion.

Consumer goods led the way for nominal goods exports, jumping 6.3% on the month after a 13.6% decline in January. Food and beverages exports rose 3.6% and industrial supplies, the largest category in February, rose 2.6%. Automotive vehicle exports declined by 3.4% on the month.

Automotive vehicle imports fell 9.9%, consumer goods imports, the largest category, increased by a small 0.6%, industrial supplies imports rose 4.4% and imports of other goods jumped 4.4%. Food and beverage imports were down 3.0%.

The trade deficit ballooned during the pandemic as consumer spending patterns shifted away from services towards goods, and supply-chain disruptions weighed on industrial production. Trade has been a drag on GDP growth for six consecutive quarters; trade was a drag on real GDP growth in the fourth quarter of 2021 and will likely be a drag on growth in the first quarter. The strong economic recovery in the U.S. from the pandemic has supported imports while a relatively slower global economic recovery has weighed on exports. The goods trade outlook is cloudy; new lockdowns in Shanghai and increased uncertainties from the Russia-Ukraine crisis will weigh on U.S. exports.

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