Economists React: Jump in Imports Outpaces Export Gain
Economists and others weigh in on the expansion in the U.S. trade deficit.
The trade deficit widened in February, as imports bounced up more than exports after the decline in trade endeavor in January. As U.S. producers and retailers seek to re-stock inventories, they will pull in more imports. This is a natural part of the recovery process. But special factors, including unusually low aircraft exports and NBC’s payment for Olympic broadcasting rights, exaggerated this month’s widening in the trade gap. –Nigel Gault, IHS Global Insight
Exports have flattened out the past couple months after surging 28% in the in the initial recovery during the last eight months of 2009. Price related weakness restrained industrial materials and food. Overall capital goods exports showed only a modest gain, but only because of a huge pullback in aircraft Ex aircraft capital goods exports surged, indicating that most of the upside in core capital goods shipments in February went overseas as a replacement for of into domestic investment. A excellent part of the gain in imports was attributable to $0.8 billion payment for Olympic broadcast rights that temporarily boosted services but will be unwound next month. Petroleum products also saw a modest gain, as a gain in volumes more than offset lower prices. Core capital goods imports excluding were down slightly, but, a negative suggestion for domestic investment. –Ted Wieseman, Morgan Stanley
The U.S. trade deficit expanded due to an augmented appetite on the part of American consumers for imported goods reflecting the gradual improvement in the overall economic outlook. After a sizeable reduction in inventories, the increase in sales has stimulated a need to replenish inventories strongly suggests that demand for goods produced abroad should continue in coming months. This is consistent with a broadening out of the economic recovery. –Joseph Brusuelas, Brusuelas Analytics
Despite the ongoing recovery, export progression is not keeping pace with domestic demand for imports in the U.S. A major drag on exports for February was civilian aircraft, which dropped more than 25% on the month. Still, outside of motor vehicles and aircraft, exports of capital goods grew by $1.2 billion. –Tim Quinlan, Wells Fargo
Higher oil prices and a slowly improving economy are chief to more and more money flowing out of the U.S. economy into other countries. –Naroff Economic Advisors
The underlying components of the report did not indicate that the weaker-than-expected export volumes resulted from one-time factors. Consumer goods exports excluding autos declined by 1.8% month-on-month after rising by 1.3% in January. In contrast, capital goods exports rose by 1.1% after dropping by 2.9% last month, and automotive exports rose by 2.3% after dropped by 5.7%. On the imports side, most of the strong gain resulted from a rebound in consumer goods imports. –Zach Pandl, Nomura Global Economics
A stable to moderately wider net export deficit in coming quarters would make sense in cyclical terms. With most businesses looking to stabilize or modestly boost inventories, underlying demand for imports has picked up substantially. At the same time, exports will continue to be supported by better economic conditions abroad. The net effect should be a reasonable stable level for the real net export deficit in the GDP accounts, which would contrast sharply with the enormous declines in the deficit that occurred during the height of the recession. –Joshua Shapiro, MFR Inc.
Compiled by Phil Izzo