The trade deficit shrunk by  4.6% matching the lowest Econoday estimate.

What affect do you think today’s report will have on GDP estimates for the first quarter?

Ponder that question while we investigate the report and details from the Census Bureau report on International Trade.

Econoday commented: “For GDP, these data are very positive and help offset not only January’s large trade deficit but also what’s evolving as a weak quarter for domestic consumer spending. For cross-border trade, this report is not upbeat, showing less demand for goods and services both here and abroad.”

US International Trade in Goods and Services

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.6 billion in February, down $4.6 billion from $48.2 billion in January, revised. February exports were $192.9 billion, $0.4 billion more than January exports. February imports were $236.4 billion, $4.3 billion less than January imports.

The February decrease in the goods and services deficit reflected a decrease in the goods deficit of $4.6 billion to $65.0 billion and an increase in the services surplus of less than $0.1 billion to $21.4 billion.

Year-to-date, the goods and services deficit increased $2.8 billion, or 3.1 percent, from the same period in 2016. Exports increased $25.8 billion or 7.2 percent. Imports increased $28.6 billion or 6.4 percent.


Import Key Points

  • Imports of goods on a Census basis decreased $4.1 billion.
  • Consumer goods decreased $3.1 billion.
  • Cell phones and other household goods decreased $1.9 billion.
  • Automotive vehicles, parts, and engines decreased $2.6 billion.
  • Passenger cars decreased $2.1 billion.
  • Industrial supplies and materials increased $1.4 billion.
  • Crude oil increased $1.3 billion.

Motor Vehicles and Parts, Phones

Over half of the decrease in imports was due to a decline in motor vehicles and parts. Cell phones accounted for the rest.

Combined, those two import categories shrank by $4.5 billion.

Effect on GDP Estimates?

With exports slightly up and imports down, it’s easy to conclude, as Econoday did, this report will have a positive impact on GDP estimates.

I propose it will not do anything. Why?

Because the Advance Report on International Trade on March 28 estimated the trade deficit would shrink by $4.1 billion. The change since that report is a negligible $0.5 billion.

It possible the models predicted services exports would rise more than they did. If so, we could realistically see GDP estimates drop a tick after this report.

Final Thoughts

Following the Advance Report, I commented: More Signs of a Weakening Economy: Imports and Exports Decline, Treasury Yields Fall.

Auto sales offered more confirmation of a slowing economy: Auto Sales Final Numbers: Down 5.7%, Two-Year Low; Don’t Worry, It’s Just a Plateau!

The ISM numbers were good but hard data does not match. For discussion, please see Markit PMI vs. ISM Fantasyland GDP Projection: Stagflation Lite?

Mike “Mish” Shedlock