The largest stumbling deficit in goods in March jumped to a record high, suggesting trade was a drag on economic growth in the first quarter, but that was likely offset by robust domestic demand despite massive government aid and eased pandemic stress.
Economic activity in the United States has rebounded more rapidly compared to its global rivals. The pent-up demand is upsetting exports, eclipsing a recovery in exports and keeping the overall trade deficit elevated. The report by the Commerce Department on Wednesday also showed that inventories at retailers in March sharply weakened, underscoring the strong domestic demand.
The widening of the commodities deficit suggests that trade will be a burden on businesses in first quarter GDP, said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. This won't be a big problem, as other parts of the economy are still doing well, such as business investment in equipment and consumer spending.
The global economy's deficit surged 4.0% to $90.6 billion last month, the highest in history of the series. Exports of goods accelerated to $142.0 billion. They were boosted by shipments of motor cars, industrial supplies, consumer and capital goods and food.
The boom in exports was offset by a 6.8% increase in imports to $232.6 billion. Imports rose across the board. There were large gains in imports of cars, industrial goods and food. The imports of capital goods also continued to rise well.
The products deficit will start to shrink at the end of 2021 and into 2022, said Bill Adams, senior economist from PNC Financial in Pittsburgh, Pennsylvania. As the Pandemic comes under control in the United States, American consumers will spend less on imported goods, shrinking imports, and foreigners will buy more U.S. exports as their economies recover further.
Stocks on Wall Street were mixed. The dollar rose against a basket of currencies. The American Treasury prices were mixed.
The report was published on Thursday, ahead of the first quarter aggregate economic production chart, which is expected to show that the economy grew in the first three months of the year at a 4.3% annualized rate after expanding in the fourth quarter, according to a Reuters survey of economists.
That would be the third fastest growth pace since the second quarter of 2003. Strong business investment and consumer spending are expected to encourage economic growth.
The increase in COVID 19-vaccination packages and the pandemic rescue package of $1.9 trillion have allowed for greater economic re-engagement, boosting consumer spending, hiring and buying of equipment.
Some of the goods imported in March end up in wholesalers' warehouses, which could blunt the pull on GDP growth from trade. The Commerce Department reported that wholesale stocks rose 1.4% in February after an increase of 0.9% in February.
But stocks at retailers tumbled 1.4% after gaining 0.1% in February. In February, sales of autos excluding the GDP, which are included into the calculation of retail stocks rose after advancing 1.4%. What are the suggestions to the authorities?