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Thursday, April 5, 2018

Nation's Trade Deficit Continues To Deepen

The nation's trade deficit keeps deepening, to $57.6 billion in February for the fourth straight showing over $50 billion in a curve that continues to accelerate. The goods gap widened 0.4 percent in the month to $77.0 billion while, in a more significant effect, the services surplus narrowed 3.1 percent to $19.4 billion.

The goods gap reflects a 1.6 percent rise in imports to $214.2 billion that offsets and masks a solid 2.3 percent rise in exports to $137.2 billion. Leading the import side is a jump in food and industrials supplies and especially capital goods, the latter a positive indication for domestic business investment. Leading the export side are industrial supplies as well as a rare jump for vehicles and also a solid gain for capital goods which points to international business investment. For services, exports did in fact extend their steady climb to an impressive $67.3 billion in the month though imports also posted a rise, up 2.3 percent to $47.8 billion (further details on services are not available).

Country data show February's net gap with China at $29.3 billion followed in the distance by the European Union at $12.1 billion and Mexico at $6.1 billion. The gap with Japan was $5.5 billion in the month and with Canada, at $0.4 billion.

Though there are clear positives, namely the strength of cross-border demand, it's the increasing drag from net exports on GDP that is really the news of this report, one that is certain to get ever-increasing attention given all the questions over rising trade friction centered between the U.S. and China.

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