Trade Will Subtract From Growth in the First Quarter

• The U.S. trade deficit was unchanged in February at $89.2 billion according to the Census Bureau.
• The goods deficit narrowed to $107.5 billion in February from $108.6 billion in January while the services surplus declined to $18.3 billion in February from $19.4 billion in January.
• 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 U.S. trade deficit was unchanged in February after hitting a record in January. The trade deficit registered at $89.2 billion in February, against consensus expectations for a decline in the deficit to $88.5 billion and following a record $89.2 billion deficit in January.

The goods deficit narrowed to $107.5 billion in February from $108.6 billion in January while the services surplus declined to $18.3 billion in February from $19.4 billion in January. The value of imports rose 1.3% in February to a record $317.8 billion while the value of exports increased by 1.8% to $228.6 billion.

Consumer goods led the way for goods exports, jumping 6.7% on the month after a 13.5% decline in January. Food and beverages exports rose 4.6% and industrial supplies rose 3%. Automotive vehicle exports declined 2.4% on the month.

Industrial supplies imports led the way for goods imports, jumping 5.5% in February, after a 2.2% increase in January. Capital goods imports rose 1.4% and consumer goods imports edged up 0.7%. Automotive imports were down 9.9% while food and beverage imports fell 3%.

Services imports increased by $2.4 billion to a record $51.6 billion while services exports edged up $1.4 billion to $69.9 billion. The biggest change in service imports was in the intellectual property category, which likely reflects broadcasting rights tied to the Winter Olympics.

The trade deficit increased during the pandemic as consumer spending patterns shifted away from services toward 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. Exports to Europe will likely slow in the near term given Russia’s invasion of Ukraine. Additionally, slower growth in China and a stronger dollar will likely weigh on U.S. trade in the first half of the year. 

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