February Trade Deficit Higher Than Expected

The nation's February trade deficit came in at a wider-than-expected $47.1 billion in a report, however, that mostly points to rising cross-border demand.

Domestic demand was up as imports rose 1.3 percent to $225.1 billion in the month led by a surge for consumer goods and also a gain in services. And foreign demand was up as exports rose 1.0 percent to $178.1 billion and include gains for the nation's consumer goods, vehicles and agricultural products. But there are signs of weakness on the export side including for capital goods, where softness has been pointing to weak global business investment, and also a rare decline, though only a marginal one, for the nation's services.

The net gap would have been larger if not for a sharp price decline in oil-related products. The price of imported crude averaged $27.48 per barrel which is the lowest since 2003 and down nearly $5 from January. This effect is likely to reverse in the next report given oil's price strength during March.

By country, the gap with China narrowed by nearly $1 billion in the month to $28.1 billion while the gap with Canada, reflecting low oil prices in the month, narrowed by $1.5 billion to an even $1.0 billion. Gaps with the EU and Mexico both widened, to $9.9 billion and $5.0 billion respectively.

The spots of weakness on the export-side are a concern but this report is mostly positive even though, given the wider-than-expected headline, it will scale back first-quarter GDP estimates.

Recent History Of This Indicator:
The nation's trade deficit is expected to widen slightly in February, to a consensus $46.2 billion vs January's $45.7 billion, but cross-border trade, based on the advance report for goods, picked up noticeably in a welcome sign for global demand. Exports of goods rose 2.0 percent in the advance data for February with imports up 1.6 percent. This year's decline in the dollar should begin to give exports some traction.