Record Trade Deficit in January, Turning Point for Weak Exports?


The widening of the trade deficit to a fresh record in January reflects the relative outperformance of the U.S. economy during a pandemic era characterized by volatile swings but generally an environment of faster growing imports and slower growing exports. Just as these trends were on track toward a normalization that might have steadied the trade gap, the Russia-Ukraine war now takes center stage. Economic sanctions, trade restrictions and watchful eye on all categories directly and indirectly linked to petroleum and natural gas are apt to set the agenda for trade for the foreseeable future.

Widening in Trade Deficit Driven by Weak Export Growth

The $7.7 million widening in the U.S. trade balance in January pushed the deficit to a record-large $89.7 billion (chart). The widening can be traced to weak export growth at the start of the year. Total exports slid 1.7% during the month with the level of goods down about 1.5% and services exports slipping 2.3%. Consumer goods exports were the main driver of weakness (chart) with a $3.2 million decline in pharmaceutical preparation products specifically more than driving the overall decline. Other major categories of goods exports broadly improved during the month. But after adjusting for inflation, real goods exports slid nearly 4% in January suggesting a negative impact on GDP growth in the first quarter from trade. READ FULL ARTICLE>>