U.S. merchandise trade deficit hits record high in March

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Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, United States, on April 7, 2021. REUTERS / Lucy Nicholson

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  • Merchandise trade deficit widens 4.0% in March
  • Merchandise exports increased by 8.7%; imports increase by 6.8%
  • Wholesale inventories up 1.4%; retail trade down 1.4%

WASHINGTON, April 28 (Reuters) – The U.S. goods trade deficit hit an all-time high in March, suggesting that trade was a drag on economic growth in the first quarter, but this was likely offset by robust domestic demand in a context of massive government aid.

Economic activity in the United States has rebounded faster than its global rivals. Suppressed demand attracts imports, eclipsing a recovery in exports and keeping the overall trade deficit high. Wednesday’s Commerce Department report also showed retailer inventories were reduced in March, highlighting strong domestic demand.

“The widening goods deficit suggests that trade will weigh on first quarter GDP,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pa. “It won’t be a big deal, as other sectors of the economy are still doing well, such as business investment in equipment and consumer spending.”

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The merchandise trade deficit jumped 4.0% to $ 90.6 billion last month, the highest in the series’ history. Exports of goods accelerated 8.7% to $ 142.0 billion. They were boosted by shipments of motor vehicles, industrial supplies, consumer goods and equipment, and food products.

The jump in exports was offset by a 6.8% increase in imports to $ 232.6 billion. Imports have increased overall. Imports of motor vehicles, industrial supplies, consumer goods and food increased sharply. Imports of capital goods also rose sharply.

Demand during the pandemic shifted towards goods and services, with Americans locked in their homes. Consumption was boosted by very generous fiscal stimulus, including the $ 1.9 trillion White House bailout for the COVID-19 pandemic, which sent one-time checks of $ 1,400 to households qualified and extended unemployment benefit of $ 300 until early September.

Economists expect the merchandise trade deficit to remain large at least until the end of the year, with demand returning to services such as air travel and restaurants following the expansion. of the COVID-19 vaccination program to all American adults.

“The commodity deficit will start to narrow by the end of 2021 and through 2022,” said Bill Adams, senior economist at PNC Financial in Pittsburgh, Pennsylvania. “As the pandemic is brought under control in the United States, American consumers will spend less on imported products, which will reduce imports, and foreigners will buy more American exports as their economies recover.”

Stocks on Wall Street were mixed. The dollar (.DXY) appreciated against a basket of currencies. US Treasury prices were mixed.

STRONG GDP GROWTH EXPECTED

The report was released ahead of Thursday’s advanced first-quarter gross domestic product data, which is expected to show the economy grew at a robust annualized rate of 6.1% in the first three months of the year after. have grown at a rate of 4.3% in the fourth quarter. , according to a Reuters survey of economists.

This would be the second fastest growth rate since the third quarter of 2003. Strong consumer spending and business investment as well as the housing market are expected to stimulate growth.

Some of the goods imported in March ended up in wholesalers’ warehouses, which could ease the drag on GDP growth from trade. The Commerce Department said wholesalers’ inventories rose 1.4% last month after rising 0.9% in February.

But retailer inventories fell 1.4% after gaining 0.1% in February. Inventories at non-auto retailers, which are included in the calculation of GDP, rose 0.6% after advancing 1.4% in February.

Goldman Sachs economists raised their estimate of first-quarter GDP growth by three tenths of a percentage point to a rate of 7.7%, noting that the reduction in retail inventories was not as large as they were. ‘had previously assumed.

Although trade flows continue to recover after being severely disrupted at the onset of the pandemic, bottlenecks in the global supply chain remain a challenge.

“Supply chain bottlenecks are likely to remain a short-term constraining factor that could weigh on trade,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York. . “However, the flows are likely to rebound once restrictions on all activities are lifted globally.”

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Reporting by Lucia Mutikani; Editing by Andrew Heavens

Our standards: Thomson Reuters Trust Principles.

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