US Trade Gap Widens to $68.9 Billion, Largest in Nearly a Year

 

The US trade deficit widened in February for a third month as the value of imports exceeded exports.

The deficit in goods and services trade expanded 1.9% from the prior month to $68.9 billion, the largest shortfall in nearly a year, Commerce Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for a $67.6 billion gap.

The value of imports rose to almost $332 billion, on gains in mobile phones, foods, and motor vehicles. Exports increased to $263 billion, reflecting shipments of civilian aircraft and crude oil. The figures aren’t adjusted for inflation.

A wider trade deficit so far this year is expected to subtract from gross domestic product for the first time since early 2022. Before the latest results, the Federal Reserve Bank of Atlanta’s GDPNow forecast showed trade subtracting nearly half a percentage point from first-quarter growth.

While the US trade balance has improved since 2022, the appetite for imported merchandise may stay elevated given resilient consumer spending and inventories that are more in line with sales. Moreover, recession risks in overseas markets are restraining demand for US exports.

On an inflation-adjusted basis, the merchandise trade deficit widened to $87 billion in February, the largest since July.

Initial applications for US unemployment benefits rose last week to the highest since January, consistent with a recent uptick in the number of job cuts.

Initial claims increased by 9,000 to 221,000 in the week ended March 30, according to Labor Department data released on Thursday. The median forecast in a Bloomberg survey of economists called for 214,000.

Continuing claims, a proxy for the number of people receiving unemployment benefits, decreased to 1.79 million in the week ended March 23.

Although the labor market has remained resilient in recent months, layoffs are on the rise. They reached a year-high in February in government figures released this week. And job-cut announcements by corporations are also at the highest in a year in data from Challenger, Gray & Christmas, which may result in rising joblessness in the coming weeks.

“Layoffs certainly ticked up to round out the first quarter, though still below last year’s levels. Many companies appear to be reverting to a ‘do more with less’ approach,” Andy Challenger, senior vice president at the executive coaching firm, said in a report Thursday.

Weekly claims tend to be volatile. The four-week moving average, which helps smooth short-term fluctuations, edged up to 214,250, the highest since February.

The unadjusted data on initial claims, which doesn’t take into account seasonal influences, also rose slightly to 196,376. California and Pennsylvania led the gains, and Midwestern states including Iowa and Illinois saw large advances.

The government’s monthly employment report due Friday will provide further insight into the labor market. Economists forecast a 213,000 gain in nonfarm payrolls in March.

Digging Deeper

• Travel exports — or spending by visitors to the US — increased to the highest since June 2019
• Travel imports — a measure of Americans traveling abroad — climbed to a fresh record high
• The US merchandise trade deficit with China narrowed to $21.9 billion, the smallest in three months, reflecting a decline in the value of imported goods
• The goods shortfall with Mexico widened to a record $15.3 billion as imports reached an all-time high