On a day which will certainly be overshadowed, at least in the minds of investors, by a dour report on nonfarm payrolls, the U.S. Department of Commerce released its latest report on the international trade gap. At first blush, the report was a good one, as it showed that the nation’s international trade deficit in goods and services decreased to $43.0 billion in February from a revised $44.5 billion in January.
The primary catalyst behind the narrowing in the trade gap was a more prominent increase in exports than imports. Specifically, exports increased from $184.4 billion in the initial month of 2013 to $186.0 billion in February. Meanwhile, imports only inched up by $100 million in February, to $228.9 billion.
The February increase in exports of goods reflected increases in industrial supplies and materials (up $1.8 billion), other goods (+$500 million), and automotive vehicles, parts, and engines (+$200 million). These gains offset decreases in capital goods, consumer goods, and foods, feeds, and beverages. Meantime, exports of services increased by a more pedestrian $200 million in February.
As noted, there was a nominal increase in imports of goods and services rise in February. A marginal decrease ($100 million) in the imports of goods was offset by a slightly higher increase ($200 million) in imports of services. On the goods side, the most notable figure was a $2.6 billion decrease in imports of industrial supplies and materials, which was partially offset by a $1.1 billion increase in shipments of automotive vehicles, parts, and engines to the United States. In the services category, no particular imports metric stood out from the others.
Breaking down the latest trade gap data by region, we saw that the goods deficit with China decreased from $27.8 billion in January to $23.4 billion in February. The main reason for the narrowing in the trade deficit with China was a $4.5 billion decrease in imports, primarily of cell phones and other household goods. Meantime, the United States’ goods deficit with Canada decreased by $2.2 billion, while the goods deficit with Mexico expanded by $700 million.
All in all, the latest trade gap data were a semi-encouraging sign for the U.S. economy and another indication that the first-quarter GDP data will probably be markedly better than the 0.6% increase booked during the final quarter of 2012. Still, given the recent weaker-than-expected reports on manufacturing and nonmanufacturing activity and disappointing readings on payroll growth and consumer confidence, the pace of U.S. economic growth is still likely to be nowhere near where it should be at this stage of the current up cycle.