US trade deficit hits record high as economy accelerates | Invest News
WASHINGTON (Reuters) – The US trade deficit hit an all-time high in February as the country’s economic activity rebounded faster than that of its global rivals and could remain high this year, with massive fiscal stimulus expected drive the fastest growth in nearly four decades.
The economy roars as increased COVID-19 vaccinations and the White House’s $ 1.9 trillion pandemic bailout boost domestic demand, some of which is satiated by imports. President Joe Biden proposed a $ 2 trillion infrastructure plan last week, which is expected to attract even more imports and spur economic growth.
“The deficit could remain large this year and next due to fiscal stimulus and the potential infrastructure plan that could be adopted in the second half of this year,” Ryan Sweet, senior economist at Moody’s Analytics told West Chester, Pennsylvania. “As the economy continues to strengthen, this will keep the deficit high.”
The trade deficit jumped 4.8% to a record $ 71.1 billion in February, the Commerce Department said on Wednesday. Economists polled by Reuters had forecast a deficit of $ 70.5 billion. The merchandise trade gap was also the highest on record.
Exports fell 2.6% to $ 187.3 billion. Exports of goods fell 3.5% to $ 131.1 billion, possibly due to unusually cold weather in large parts of the country. The decrease was mainly attributable to shipments of capital goods, which fell by $ 2.5 billion.
Exports of consumer goods declined, as did those of motor vehicles, parts and engines. There were also fewer food exports. The pandemic remained a drag on exports of services, in particular travel.
Imports fell 0.7% to $ 258.3 billion. Imports of goods fell 0.9% to $ 219.1 billion. The decline is likely a reflection of supply chain constraints, rather than weak domestic demand. In fact, imports of capital goods have reached a record level, boosted among other things by civil aircraft, medical equipment and electrical equipment.
Imports of industrial supplies and materials were the highest since October 2018, thanks to crude oil imports worth $ 1 billion. This led the United States to register its first oil deficit since December 2019.
But imports of motor vehicles, parts and engines fell, as did those of consumer goods. The reduction in trade flows in February was partly due to difficult weather conditions, logistics and transport problems at ports.
“Congestion at the ports of Los Angeles and Long Beach, which together account for a third of US container imports, has caused container ships to anchor offshore while they wait for available port space,” said Jay Bryson, economist. chief at Wells Fargo Securities in Charlotte, North Carolina.
“Even when ships are moored and unloaded, port officials report higher than normal container dwell time, or the time it takes importers to collect their cargo at port.”
After the recent six-day blockade of the Suez Canal, economists expect trade flows to remain depressed in March.
Wall Street stocks were trading higher. The dollar slipped against a basket of currencies. The prices of the US Treasury were mostly higher.
Adjusted for inflation, the goods trade deficit hit a record $ 99.1 billion in February, from $ 96.1 billion in January. The so-called real trade deficit is well above average for the October-December period.
JPMorgan economists estimate that trade could subtract a full percentage point from first-quarter GDP growth, which would be the third consecutive quarterly drag.
But this is unlikely to have an impact on estimates of first-quarter GDP growth, currently as high as an annualized rate of 10%. The economy grew 4.3% in the fourth quarter.
Economists expect growth this year to exceed 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, the worst performance in 74 years. The International Monetary Fund predicts the global economy will grow 6% this year, driven primarily by the US economy, which the fund says is expected to grow 6.4%.
From the labor market to the hard-hit manufacturing and service industries, activity picked up sharply in March.
But the housing market, one of the star players in the pandemic, is showing signs of fatigue.
A separate Mortgage Bankers Association (MBA) report released Wednesday showed home purchase loan applications fell 4.6% last week, dropping for the second week in a row.
According to the MBA, the 30-year fixed mortgage rate rose to 3.36%, a 10-month high. This, combined with rising house prices due to an acute shortage of properties, makes home ownership more expensive for some first-time buyers.
“With inventory at record levels and affordability increasingly strained thanks to rapidly rising house prices, we expect home purchase demand to follow a downward trend this year,” he said. said Matthew Pointon, senior real estate economist at Capital Economics in New York City.
(Reporting by Lucia Mutikani Editing by David Goodman and Paul Simao)
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