The Economy

U.S. Trade Gap Narrows to $43.6B in February

The 9.6% decline from January reflects a rise in exports to the highest level since December 2014.
Matthew HellerApril 5, 2017
U.S. Trade Gap Narrows to $43.6B in February

The U.S. trade deficit pulled back last month from January’s near two-year high as exports increased to their highest level in more than two years.

The Commerce Department said the trade gap dropped 9.6% in February to $43.6 billion after reaching $48.2 billion the previous month. Economists had forecast the deficit falling to $44.8 billion in February.

When adjusted for inflation, the deficit decreased to $59.7 billion, with exports of goods and services increasing 0.2% to $192.9 billion, the highest level since December 2014. Exports have been boosted by stronger global growth.

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Imports of goods and services fell 1.8% to $236.4 billion, reflecting slowing domestic demand for items such as cell phones and motor vehicles. Imports had risen in recent months, in part on higher oil prices.

“Despite the decline in the real trade deficit, trade will probably be either neutral or impose a small drag on gross domestic product in the first quarter after subtracting 1.82 percentage points from fourth-quarter growth,” Reuters said.

“In addition to trade, weak consumer spending also likely constrained the economy in the first three months of the year,” it added.

The politically sensitive trade deficit with China narrowed sharply by 26.6% from January to $23 billion ahead of this week’s summit between President Donald Trump and China’s Xi Jinping this week, but economists believe seasonal factors likely accounted for the drop.

“The U.S has its work cut out for it if it is going to try to alter the pattern of trade that has developed between China and U.S. companies over the last 10 to 20 years,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department also reported Tuesday that new orders for U.S.-made goods increased for a third straight month in February on growing demand for machinery and electrical equipment.