US trade deficit hits record high as economy picks up speed


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By Lucia Mutikani

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 a massive fiscal stimulus expected to boost the economy. fastest growing in almost four decades.

The economy is booming as increased COVID-19 vaccinations and the $ 1.9 trillion White House 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 the fiscal stimulus package and potential infrastructure that could pass in the second half of this year,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, in 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 trade gap in goods was also the highest on record.

Exports fell 2.6% to $ 187.3 billion. Exports of goods fell 3.5% to $ 131.1 billion, likely hit by unusual cold weather in large parts of the country. The decrease was mainly attributable to capital goods shipments, which fell by $ 2.5 billion.

Exports of consumer goods fell, as did those of motor vehicles, parts and engines. There were also fewer exports of food products. 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 in particular by civil aircraft, medical equipment and electrical equipment.

Imports of industrial supplies and materials were the highest since October 2018, thanks to $ 1 billion in crude oil imports. 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 inclement weather, logistics and transport problems at the 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 be anchored offshore while waiting for available port space,” said Jay Bryson, chief economist at Wells Fargo Securities in Charlotte, North Carolina.

“Even when ships are moored and unloaded, port officials report a longer than normal container dwell time, or the time it takes importers to collect their cargo at port.”

Following 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.

KEEP THE GROWTH

Adjusted for inflation, the goods trade deficit soared to 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 period October to December.

Economists at JPMorgan 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 hurt estimates of first-quarter GDP growth, which currently stand at 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 forecasts global economic growth of 6% this year, driven primarily by the US economy, which the fund has estimated will 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 key players in the pandemic, is showing signs of fatigue.

A separate Mortgage Bankers Association (MBA) report on Wednesday showed applications for loans to buy a home fell 4.6% last week, down for a 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 a severe shortage of properties, makes homeownership more expensive for some first-time homebuyers.

“With inventory at record levels and affordability increasingly tight thanks to rapid increases in house prices, we expect home purchase demand to decline this year,” said Matthew Pointon, senior real estate economist. at Capital Economics in New York.

(Reporting by Lucia Mutikani Editing by David Goodman and Paul Simao)


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