Tue, May 21, 2024

The U.S. trade deficit rose to a record high

Inflation

The U.S. trade deficit rose to a record high in February as the nation’s economic activity recovered more quickly than that of its global rivals. Analysts say it could remain elevated in 2021, with massive fiscal stimulus anticipated to spur the fastest growth in almost four decades.

The economy is recovering as boosted coronavirus vaccinations and the White House’s $1.9 trillion pandemic rescue package increase domestic demand. U.S. President Joe Biden last week proposed a $2 trillion infrastructure plan, expected to pull in even more imports and support economic growth.

According to a senior economists at Moody’s Analytics in West Chester, Pennsylvania, Ryan Sweet, the deficit could remain wide in 2021 and 2022 because of the fiscal stimulus and potential infrastructure package that could pass in the second half of 2021. He added that as the economy resumes strenghtening, whis will keep the deficit wide.

According to the Commerce Department, the trade deficit surged 4.8% to a record $71.1 billion in February. Economists had forecast a $70.5 billion deficit.

Exports fell by 2.6% to $187.3 billion. Exports of goods dipped by 3.5% to $131.1 billion, affected by unseasonably cold weather across large parts of the country. Moreover, the slump was driven by shipments of capital goods, which sank $2.5 billion.

Consumer goods exports declined, as well as motor vehicles, parts, and engines. Moreover, there were also fewer food exports.

Trade flows is likely to remain depressed in March

Imports slid 0.7% to $258.3 billion. Goods imports slumped 0.9% to $219.1 billion. Undoubtedly, imports of capital goods reached a record high, supported by civilian aircraft, medical equipment, and electric equipment, among others.

Furthermore, imports of industrial supplies and materials were the highest since October 2018, thanks to $1 billion worth of crude oil imports.

According to economists, following the recent six-day blockage of the Suez Canal, trade flows will remain depressed in March.

Additionally, stocks on Wall Street boosted. The U.S. dollar dipped  versus a basket of currencies, while U.S. Treasury prices boosted.

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