February’s trade deficit at $47.1 billion came in by more than the expected reading of a $46.2 billion deficit. This was the result of a 1.0% rise in exports against a 1.3% increase in imports. Annually, the change in exports is now 4.2% lower, while imports were 0.3%, the first increase since March 2015. Meanwhile, the nonpetroleum deficit increased to $59.9 billion in February from $58.0 billion in January. The non–seasonally-adjusted volume of oil imports was lower in February at 214.7 million barrels after 226.7 million in January. There was also another large decrease in the unit price of imported crude oil of 14.3% in February (largest since February 2015) after a 12.4% fall in January. Total petroleum exports increased by 3.2% in the month.
Beneath the headline figures, the bulk of this month’s increase in goods exports was largely the result of a $1.1 billion rise in exports of consumer goods (largely gem diamonds $0.6 billion and pharmaceutical preparations $0.3 billion) and other goods (up $0.6 billion). The change in goods imports, meanwhile, reflected a $3.6 billion decrease in consumer goods (pharmaceutical preparations [$1.3 billion] and automotive vehicles, parts, and engines [$1.5 billion]).
Over the past five quarters including fourth quarter 2014 to fourth quarter 2015, trade has subtracted an average of 0.6 percentage points from aggregate GDP growth per quarter. The last quarter (fourth quarter 2015) had a negative contribution of 0.14 percentage points. Clearly, the benefits from the decline in commodity prices, in particular energy, are being outweighed by the dollar’s strength and the weakness in global demand. Meanwhile, the volume of energy imports has tentatively started to trend upward, even though the price continues to plummet. The impact of the dollar on output growth has been a significant factor holding back the Fed at recent meetings, and the slightly stronger pace of growth domestically, relative to the still-challenged growth abroad, suggests that trade is likely to continue to act as a brake on aggregate output for a while yet.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.